S. Koreas Manufacturing Sentiment Hits 10-Year Low

South Korea's manufacturing confidence for the first quarter of 2009 fell to a 10-year low as a slump in domestic demand and exports is expected to deepen, Yonhap News reported quoting a poll Wednesday.

The Korea Chamber of Commerce and Industry said its business survey index (BSI) dropped to 55 for the January-March period from 79 for the fourth quarter of this year. The index is at its lowest since the fourth quarter of 1998, when it stood at 61 following the nation's economic crisis.

The survey was taken of 1,334 manufacturers. A reading below 100 indicates pessimists outnumber optimists.

The BSI for exports, the biggest growth engine for Asia's fourth-largest economy, fell to 80 for the first three months of next year, compared with 99 for the fourth quarter of 2008, the survey showed.

Domestic consumption is also expected to decline sharply with the figure coming to 66 from 91 in the cited period.

Nearly 39 percent of the manufacturers surveyed cited soaring raw material costs as the biggest concern for their business activities, followed by a weakening won with 24.3 percent.

The gloomy outlook came as South Korea's growth rate is forecast to fall steeply amid the global credit crunch sparked by the U.S. mortgage loan crisis.

Finance Minister Kang Man-soo predicted last week that the economy may grow in the mid to upper range of 2 percent, failing to reach the previously predicted 4 percent range.

Damping outbound shipments and domestic spending cut slowed the economic growth to 0.6 percent in the July-September period vis-a-vis three months earlier, the slowest growth in four years.

In early November, the Bank of Korea lowered its short-term policy rate to 4 percent, slashing a combined 1.25 percentage point in a month to prevent a sharp economic slowdown.