Korea to see GDP growth of 6.2% next year

The nation's gross domestic product growth will likely drop to 6.2% next year from this year¡¯s estimated 8.7%, and worse yet, the trade deficit will plummet to below half of this year's target figure, registering US$3.4 billion.

The Korea Institute for Industrial Economics and Trade (KIET) said Thursday in its ¡°Economic outlook for 2001¡± report that signs of an economic slowdown will start in this year's latter half in line with deteriorating internal and external factors, including high oil prices and interest rates. The state-backed think tank projected that the investment sector will record year-on-year growth of 15.3% next year, down from the 37.4% growth estimated for this year.

In addition, an expected 11.2% gain in exports will be dwarfed by imports, which are projected to gain 16.6% over the previous year. As a result, the trade surplus next year is forecast to plunge to US$3.4 billion. This figure is far below half of this year's surplus.

Consumer price growth, which is estimated to register a 2.3% gain, year-on-year, for this year, will likely rise to 3.0% next year, propelled by hikes in public charges and high oil prices. Consequently, year-on-year growth of final consumption expenditure and private consumption are expected to drop to 4.0% and 4.6%, respectively, next year, from this year's 6.3% and 7.3% gain.

Meanwhile, the KIET forecast that narrowed surplus in the current account balance coupled with slowed capital inflow will push the won-dollar exchange rates down to 1,090 won next year from the 1,120 level this year.

The institute also estimated this year's interest rates, based on the average yield of 3-year mature corporate bonds, at about 9.7%. It projected that the figure will slightly rise to the 10.3% level next year.

Noting that the gap between the information-communications sector and other conventional manufacturing sectors is widening and bipolarization among regional economies is deteriorating, the KIET stressed that in order to relieve the unbalance, the government should launch efforts to find new knowledge-intensive industries while simultaneously focusing on expanding the foundation of information-communications technologies.

Lee Myung-Jai mjlee@donga.com