By Kim Tae-gyu
Staff Reporter
Over the past few weeks, the stock markets globally have staged rallies on news that the United States will remove toxic assets from its banks, while some economic indicators have shown signs of improving.
From the perspective of a Korean private think-tank, however, this may be another false dawn instead of a harbinger of sustained recovery from the financial crisis.
The Hyundai Research Institute (HRI) projected Sunday that the U.S. housing market where the sub-prime mortgage turmoil initiated the crisis will continue to suffer a downturn causing a secondary crisis anytime soon.
``Recent upswings in the housing market appear to be temporary and a full-fledged recovery could only be possible this September at the earliest,'' it said in a report.
``In consideration of historic data, the slump in the housing market may extend to early next year. This would weigh on banks, insurers and credit card firms, and generate a second crisis,'' it said.
U.S. housing starts totaled 583,000 in February, up 25.1 percent from the previous month. Building permits also posted an unexpected 3-percent rise in February on a monthly basis.
The figures provided a ray of light to investors, but HRI said they were just technical bounces after tallies hit short-term lows in January.
The institute particularly took issue with the rising unemployment rate, which it feared will reach double figures in the not-so-distant future, as one of the strongest triggers for another financial storm.
According to the U.S. government late last week, employers had shed more than 660,000 jobs in March, sending the jobless rate of the world's largest economy to 8.5 percent from 8.1 percent.
In other words, up to two million jobs have evaporated in 2009 in the U.S. alone and the ranks of the unemployed now amount to 13.2 million there.
``Seoul is required to frontload spending of the supplementary budget as well as nurturing domestic markets to prepare for the worst-case scenario,'' HRI said.
Citigroup economist Oh Suk-tae agrees the economy might face another dip.
``The economy seemingly hit bottom. But nobody knows if this bottom is an absolute or a short-term low. We need to prepare for a possible double or triple dip,'' Oh said.