Global Banks Predict 4.5-Pct. Growth for Korea

With international oil prices surging and the global economy slowing down, eight global investment banks have lowered their economic forecasts for Korea this year to an average of 4.5 percent.

The Korea Center for International Finance said yesterday that the banks cited the U.S. subprime mortgage crisis, skyrocketing oil prices and surging raw material prices as sending shockwaves throughout the export-driven Korean economy.

Vice Strategy and Finance Minister Bae Kook-hwan said, “If international oil prices keep surging, Korea’s economic growth is highly likely to range between 4.5 and 4.9 percent this year.”

Bae is the first official of the Lee administration to say growth will fall to the four-percent range. The government had set its official forecast at six percent.

“As the global economy gets out of its decade-long economic boom and slows down. Korea’s growth is highly likely to fall to the four-percent range,” he told The Dong-A Ilbo.

The finance center said the forecasts for Korea by the banks averaged 4.5 percent this year, citing data released in late May by BNP Paribas; Goldman Sachs; JPMorgan; Lehman Brothers; Morgan Stanley; Deutsche Bank; Citigroup; and Merrill Lynch.

The projection of 4.5 percent is lower than that released in late April (4.6 percent) and that made in late January (4.7 percent).

The forecast is the second-lowest in Asia excluding Japan, only higher than 4.2 percent for Taiwan. China is expected to see the highest growth of 10.2 percent, and most countries of the region are expected to see growth exceed five percent.

Indonesia is projected to grow 5.9 percent; the Philippines 5.6 percent; Singapore 5.4 percent; Malaysia 5.4 percent; and Hong Kong 5.2 percent. The average growth forecast of the nine economies is 5.7 percent.

The eight banks said the Korean economy will grow 4.8 percent next year, the lowest among the nine Asian nations. Taiwan is expected to see 4.9-percent growth next year.

Consequently the Korean government and state-run and private think tanks are also considering cutting their 2008 growth forecasts.

jarrett@donga.com larosa@donga.com