By Kang Seung-woo
Strategy and Finance Minister Yoon Jeung-hyun is seemingly overly ambitious about this year’s growth forecast, considering his ministry’s prediction outpaced almost all other forecasters.
The finance ministry’s projection of 5-percent growth for 2011 has been undercut by yet another organization.
The U.N. Economic and Social Commission for Asia and the Pacific (ESCAP) became the latest to go below Yoon’s growth forecast Monday, when it said that Korea’s economy is expected to grow 4.2 percent. ESCAP is the regional development arm of the United Nations for the Asia-Pacific region.
Following 6.1 percent growth last year, the ministry said last month that the nation’s economy is forecast to grow about 5 percent this year, driven by a steady rebound in global markets and robust domestic demand.
“In the process of returning to a normal growth pace following the fast economic rebound, it is true that the economic growth rate appears to be slowing to some extent,” Minister Yoon said at a joint press conference. “But with domestic demand and exports remaining brisk, we consider that the economic recovery still continues ... The economy will expand 5 percent in 2011.”
However, the forecast announced by Yoon is much higher than those of others.
Although ESCAP’s estimate is much lower than Yoon’s, it is in line with economic fundamentals with uncertainties in global markets such as the weakening U.S. economic recovery and the recurring financial crisis in the eurozone.
The Organization for Economic Cooperation and Development (OECD) and the International Monetary Fund (IMF) came up with projections of 4.3 percent and 4.5 percent, respectively, while the Bank of Korea (BOK) and the state-run Korea Development Institute (KDI) forecast 4.5 percent and 4.2 percent.
In addition, local think tanks and foreign investment banks painted a poor outlook for the future of the Korean economy.
Growth forecasts by the Samsung Economic Research Institute (SERI) and the LG Economic Research Institute were 3.8 percent and 4.1 percent, respectively, while Bank of America, Merrill Lynch, UBS, Deutsche Bank and Nomura put the growth estimate at below 4 percent.
“In general, the government’s economic projection is a kind of target for it to work towards rather than just an outlook,” said Shin Min-young, chief of economic research department at the LG Economic Research Institute.
“But the government’s 5 percent projection for 2011 will not be easy to achieve, taking into account the fiscal outlays and the exchange rate.”
Nonetheless, the finance ministry still remains positive about its projection.
“Although jitters are increasing due to soaring oil and raw material prices, the government believes that its target of around 5 percent growth can be reached,” a ministry official said.