KDI forecasts 4% economic growth this year

Korea Development Institute (KDI) president Kang Bong-Gyun said Korea`s economic growth rate this year would fall significantly to the mid-4 percent range. In order to absorb the shock from the downturns in the U.S. and Japanese economies, Korea needs of a growth-oriented strategy, he said.

Kang made the remarks during the Korean Economic Forecast and Current Issues discussion session, arranged by the Korea Junghak Research Institute and held at the Lotte Hotel on Tuesday.

``In the first half, economic growth will remain at the 3 percent level, but going into the second half growth will pick up to 5 percent, finishing the year at about the 4 percent level,`` he said. ``However, if the U.S. economy takes a rapid slide, the international financial market may contract, which in turn will lower our economic growth rate below the mid-4 percent range.``

He added, ``In the event the U.S. and Japanese economies experience drastic slowdowns, economic support measures will have to be implemented in order to absorb the shock.`` As a large portion of the budget was already injected in the first half, measures will have to be taken in the second half with respect to fiscal affairs, he said.

Kang pointed out that the Bank of Korea`s push to stabilize inflation was not an advisable policy and that a monetary policy taking into consideration overall market liquidity and the current economic situation should be implemented. ``In short, a rate cut is needed,`` he said.

In relation to the corporate bond acquisition plan, Kang said, ``There is a need to induce every company to engineer its own recovery by applying a punitive rate through an increase in interest rates and guarantee fees.``

[Yonhap]