By Kim Tae-gyu
Staff Reporter
The consensus seems to be that the Korean economy will shrink in the first quarter of the year, though by how much is uncertain.
HMC Investment Securities' top researcher Lee Jong-woo, Korea's equivalent of ``Dr. Doom'' Nouriel Roubini, said Wednesday that the economy is likely to get smaller by upside of 10 percent year-on-year in the first three months of this year.
His remarks came on the heels of the gloomy expectations expressed Tuesday by newly appointed Strategy-Finance Minster Yoon Jeung-hyun that the nation will face 2-percent negative growth overall in 2009.
``We maintained the false belief that the economy will not shrivel by double digits because we have never experienced such a horrible scenario,'' said Lee, who basked in the spotlight by predicting last year's stock market crash.
``However, chances are that the economy might contract by more than 10 percent in the first quarter of this year from a year ago since economic indicators have deteriorated so quickly as of late,'' the 46-year-old said.
According to the Bank of Korea, a 10 percent-plus contraction has never taken place here compared to the same period in the previous year.
The biggest quarterly plunge was 8.1 percent year-on-year over the July to September period in 1998, when the Asian financial crisis hit the country.
As a harbinger heralding drastic recession in the first quarter, Lee took issue with the free-falling exports, which amount to more than half of GDP.
``Exports plummeted 19.5 percent and 17.9 percent in November and December 2008, respectively. They were bad, but January was even worse, with a 32.8-percent decline,'' Lee said.
``We have to see how things evolve in February and March to find out first-quarter results. But January performances appear to offer a glimpse of what's in store in the coming months, which worries me,'' he said.
Prof. Kim Tae-dong of Sungkyunkwan University also said the economy would head south quickly. He was a top economic advisor to the former Kim Dae-jung administration in the late 1990s.
``Because our economy contracted so much in the final quarter of 2008, just a small drop quarter-on-quarter would cause a big dip on a year-on-year basis,'' Kim said.
``I believe the GDP will shrivel over the January to March period compared to the fourth quarter of 2008. Subsequently, the year-on-year contraction will be substantial. I don't think it will reach double digits, though,'' he said.
Yu Byoung-gyu, an executive researcher at the Hyundai Economic Research Institute, did not concur with the ``sky-is-falling,'' worst-case scenario.
``I agree that we'll face unprecedented results in the first quarter. However, double-digit contraction is simply an overblown expectation,'' he said.
Meanwhile, an increasing number of institutions at home and abroad project negative growth for this year.
Earlier this month, the state-run Korea Development Institute (KDI) revised the nation's 2009 growth estimates from 3.3 percent to a mere 0.7 percent, including negative growth of 2.6 percent in the first half.
The International Monetary Fund (IMF) said Korea would face a four-percent contraction this year based on minus 5.1 percent growth over the first quarter.
Even Finance Minister Yoon predicted a two-percent GDP decline this year at a press conference timed with his inauguration Tuesday, meaning the domestic economy will suffer its first full-year contraction in 11 years.
In comparison, the Bank of Korea maintains its original expectation that the GDP will expand by 2 percent this year, but rumors have circulated that the central bank has already cut down the rate internally.