Economic Growth Next Year to Hit 11-year Low

The Bank of Korea said yesterday that economic growth next year will rise two percent, the lowest level in 11 years.

The number of new jobs is also expected to plummet to 40,000 from 140,000 this year, forecasting a bleak picture in the employment market.

In a report, the central bank predicted growth will significantly slow next year to just two percent, a level unseen since the economy contracted 6.9 percent in 1998 at the height of the Asian financial crisis.

GDP growth in the fourth quarter this year fell 1.6 percent from the third, posting negative growth quarter-on-quarter for the first time since minus growth of 0.4 percent in the first quarter of 2003.

The decline in this year’s fourth quarter was the largest since the first quarter of 1998, which saw a drop of 7.8 percent.

The Bank of Korea also said economic growth this year will reach 3.7 percent.

On employment, the bank also said job growth next year will see its lowest record since 2003, when the number declined 30,000 from the previous year.

Due to falling prices of raw materials and declining private consumption, inflation is expected to stay moderate at three percent next year from 4.7 percent this year.

The country is likely to post a current account surplus of 22 billion dollars next year, a turnaround from the deficit of 4.5 billion dollars this year.

Exports, the key engine of growth for the trade-driven economy, are forecast to plunge 6.1 percent after rising 14.7 percent this year, the steepest drop since a fall of 12.7 percent in 2001.

“In the absence of strong indications that the global financial crisis will recede soon, the Korean economy will be also affected by slow consumption. It will be difficult for the economy to regain its growth momentum over the short term,” the central bank said.

The report, however, said the Korean economy will get better in the second half of next year, and recover to growth of four percent by 2010.

parky@donga.com