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Korea's gross domestic product shrank 3.4 percent during the fourth quarter of last year compared to the same period of 2007, the central bank said Thursday. It was the first time since the fourth quarter of 1998, at the height of the Asian crisis, that the Korean economy shrank on a quarterly basis. The announcement shows that the global financial crisis that began in September has spread to Korea's real economy.
Korea's economy has shrunk only twice since 1960, when it started industrialization after rising from the ashes of the Korean War, in 1980 (-1.5 percent) and in 1998 (-6.9 percent).
Negative growth in 1980 was due largely to the second oil shock, but when global oil prices fell the next year, the economy got back on track. The second instance was due to the Asian financial crisis, when Korea had to turn to the International Monetary Fund for an emergency bailout. The country used the experience to change economic and business practices and ended up recovering quickly due to a healthy global economy.
Chances are growing that 2009 will be the third year the economy shrinks. The government's official GDP growth target for this year is around 3 percent, but state-run economic think tank Korea Development Institute just lowered its forecast to 0.7 percent. Morgan Stanley was even more pessimistic, forecasting -2.8 percent this year.
(englishnews@chosun.com )
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