By Kim Jae-kyoung
The Korean economy is losing steam at the fastest pace among OECD member economies, which experts believe is the aftermath of the fast recovery over the past year initiated by the government’s aggressive stimulus measures.
According to the OECD Wednesday, Korea recorded 101.3 in the organization’s composite leading indicators (CLI) in October, down 0.5 points from a month ago. It marked the largest monthly drop among OECD member nations, indicating the Korean economy will face a fast slowdown in the first half of next year.
CLI, which reflects industrial output, housing market, financial market and gross domestic product (GDP), refers to the OECD’s standardized consumer and business confidence indicators. It is seen as an indicator of forecasting the course of the economy in four to six months.
Turkey ranked second in terms of economic slowdown with its index falling 0.4 points, while Australia, Denmark and New Zealand shared third place with a 0.2 point decrease. Canada, Italy and Japan were also in negative territory. On average, OECD member countries posted an increase of 0.1 of a point during the same period.
If CLI rises in the above-100 range, it means that the economy is in the expansion phase. If it falls, it implies that the economy is losing growth momentum.
The nation’s CLI has been on the decrease for 10 consecutive months. After peaking at 104.6 in December 2009, the CLI for Korea has decreased to 102.3 in August, 103.1 in June, 103.7 in April and 104.3 in February.
“Due to the high base effect from the fast recovery this year, the economy is expected to experience a faster slowdown in the first half of next year before bouncing back in the second half,” said an official from the Ministry of Strategy and Finance.
“We plan to cope with economic challenges by frontloading next year’s budget and implementing policies in a timely manner,” he added.
Last week, the Bank of Korea (BOK) reported that the nation’s GDP grew only 0.7 percent in the third quarter from a quarter ago, the slowest pace in a year and a half. It grew 2.1 percent in the first quarter and 1.4 percent in the second.
The central bank said that the economic growth will fall to 3.8 percent in the first half of next year before bouncing back to 5 percent in the second half in line with a recovery in the global economy.