UBS predicts Korean economy to grow 1.9%

By Kim Jae-won

UBS has forecast the Korean economy will grow 1.9 percent this year, a big cut from 3.8 percent in early 2011 due to market jitters over the eurozone debt crisis, a financial research center said Monday.

According to the Korea Center for International Finance (KCIF), the Switzerland-based global investment bank predicted the most negative economic outlook for Korea among nine international investment banks (IBs).

The average economic growth for Asia’s fourth-largest economy reached 3.4 percent as of the end of December, down from the 4.5 percent projected at the end of last January. The figure is 0.3 percentage point lower than the government’s growth outlook announced late last year.

Nomura, Morgan Stanley and BNP Paribas predicted 3 percent, 3.2 percent and 3.3 percent growth respectively, all below the average.

Deutsche Bank forecast 3.4 percent of gross domestic product (GDP) growth for Korea in 2012, while Barclays and Goldman Sachs suggested 3.5 percent.

Bank of America Merrill Lynch and JPMorgan Chase predicted a relatively optimistic 3.6 percent economic growth.

The IBs’ outlook cut came as the troubled eurozone has still not found a way out of its debt crisis, which will likely continue to overshadow the rest of the global financial market, the KCIF said.

The think tank said the first quarter will be another test for momentum as 207.5 billion euro sovereign debts maturing in five troubled European nations of Portugal, Italy, Ireland, Greece and Spain within that time.

The banks expect that 17 eurozone economies will experience minus 0.5 percent growth this year.

They said the economies will see minus 1.1 percent and minus 0.8 percent movement in the first and second quarters respectively, but it will rise to 0.3 percent in the third quarter.

The foreign IBs estimate the Korean economy to have expanded 3.6 percent last year, while predicting an average of 4.2 percent for 2013.

They expect the United States and Japan to grow 2 percent and 1.6 percent respectively this year, with the growth projection for China slashed to 8.3 percent as it is not immune to global uncertainties.