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The financial crisis in the United States is expected to have adverse effects on Korean economic indicators like export, production and consumption, limiting growth rate to the upper 3 percent or lower 4 percent range. This is significantly lower than the government prediction of 5 percent.
According to public and private economic research institutes on Sunday, the Wall Street crisis will send major export markets in China, Europe and the U.S. into recession, and tighten financial markets, which will in turn curtail corporate investment. As a result Korea¡¯s economic growth rate will slow down. The institutes had initially forecast the Korean economy would grow some 5 percent next year, but due to the unexpectedly big impact of the U.S. financial crisis, they are adjusting their predictions.
The Korea Institute of Finance predicted growth would remain around 4 percent -- 3 percent in the first half and 4 percent in the second half of next year. The think tank said exports, the backbone of the Korean economy, will be scaled down by a huge margin due to the global recession.
The Bank of Korea initially expected the economy to recover by the second half of next year, but as the impact of the U.S. financial crisis seems set to linger, it changed to a more pessimistic outlook. Bank of Korea Governor Lee Seong-tae said last week, ¡°It doesn¡¯t seem that the situation of Korean economy will improve in the next few months.¡±
Various economic indicators are negative. The Business Survey Index for October released by the Federation of Korean Industries on Sunday, a study of 522 corporations, showed a fall in expectations from 98.3 in September to 84.9 in October. A reading of 100 means there are equal numbers of optimists and pessimists. More companies clearly expect that things will get worse, especially for the construction, petrochemical and retail industries.
(englishnews@chosun.com )
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