When Economy Revive

Korean Development Institute (KDI): Indicators is OK without substance. KDI analyzed in the weekly economic trends that the current Korean economy is mixed with the positive and negative aspects.

KDI reported that the growth rate of the first quarter of this year would exceed 3.7 percent, which increased from earlier expected 3.5 percent. However, KDI analyzed that the substance of the growth turned out more negative than the previous expectation due to the drastic downfall of the export price and the consumer expenditure from expected 2.4 percent to 0.4 percent.

KDI anticipated that, while the domestic consumer demand is to be recovered, the export remains frozen and therefore, the annual growth of the national economy is to end up with previously expected 4.0 percent.

Particularly, the rate of the export to contribute on the national economic growth is expected less in the following quarters than the first quarter, by the influence of the U.S. and Japanese economic stagnation. However, the positive expectation of home economy and industries, the early execution of governmental budget and the increase of the employment might partially boost the domestic economy.

Samsung Economic Research Institute: Overall economic recovery is not expected. A report of the Institute, `The characteristics and the prospect of the recent Korean economy,` analyzed that the future Korean economy is still unstable due to the reduction of exports and investment even though the stagnation of the domestic economy has become controlled.

The report showed that the growth rate of the exports lowered to –9.3 percent, which is the lowest rate since February 1999 (-16.8 percent) and anticipated –4.0 percent of export growth rate in the second quarter. The annual growth rate of investment is also forecasted as 1.0 percent. The Institute also analyzed that the increased consumer price is to reduce the actual income of the consumers and finally lead to the reduced consumption. The consumer price increase compared to the same period of the last year was anticipated as 4.8 percent and 4.1 percent in the first and latter half of the year respectively. The higher rate than 3.0 percent expected by the government is due to the additional increase of the public utility charges and the influence of the increased won exchange value to dollar.

LG Economic Research Institute: Warns Japanese type stagnation. The Institute warned yesterday that Korean economy is in danger of Japanese type stagnation, which the corporate are reluctant to invest due to the uncertainty of the Korean economy, even though they have money to invest.

According to the report of LG ERI, the facility investment of the first quarter was reduced for the first time since the 4th quarter of 1998 and the IT investment, which covers 47 percent of all facility investment, also has reduced. In addition, the debt of the corporates has lowered to 619 trillion won at the end of last year from 662 trillion won of the first quarter of 1999 but the enterprises have not invested their reserved capital.

The Institute emphasized that the government has to re-examine, to revitalize the investment sentiment of the corporates, not only its budget and financial policies but also the regulations on the industrial activity. ``Once the sentiment turned negative, the currency and financing policies of the government, such as the low interest and intensified execution of the budget, will not work,`` the reported warned.

Kim Seung-Jin sarafina@donga.com