Government Lowered Growth Estimate

The government has reviewed the plan to lower the economic growth rate to 4-5 percent, down one percent point from its original estimation of 5-6 percent. The government will also lower the target figure of the export growth rate, but will increase the target figure of the trade surplus to a great extent.

Park Byung-Won, the Director of the Economic Policy Bureau of the Ministry of Finance and Economy (MFE), told yesterday that ``While the domestic economy has shown the good sign of the recovery, the timing of the recovery of the U.S.`s economy is uncertain as well as the exports have not gone smoothly. Hence, the officials of the Ministry have agreed to lower the Gross Domestic Product (GDP) growth estimate``. The MFE plans to declare the downward adjustment of the economic growth rate in the `general economic measures for the second half` which will be released at the end of this month.

The MFE also plan to lower greatly the target figure of the export growth rate from the original projection of 10 percent, taking into account that the exports have declined for the past three months, compared to the same period of last year, and the semiconductor business which is the major exporting goods, has been in downturn.

On the other hand, the MFE will adjust the target figure of the trade surplus to above $10 billion, up from the original estimation of $5-7 billion, considering the situation in which the imports have declined to a larger extent than the exports.

And the increase rate of consumer price will be estimated to the latter half of 3 percent, but will be adjusted at the end of June, reflecting the impact of the drought. The unemployment rate will be maintained at the latter half of 3 percent because there will be no restructuring factor in the second half.

Meanwhile, Kang Bong-Kyun, the President of the Korea Development Institute (KDI), prospected in the speech at the breakfast meeting of the Graduate School of Public Policy of Korea University, that ``The potential growth rate of Korea will the average of 5.1 percent for the next decade (2001-2010), and will be the average of 4.1 percent for the next decade after that (2011-2020).

President Kang, however, added the assumption of ``as long as the productivity continues to increase by the corporate restructuring and the technological innovation``.

The potential growth rate refers to the long-term sustainable growth rate without generating the inflation. Kang also said that ``The change of the potential growth rate by the increase of the labor power will be very slight (0.2-0.3 percent) for next 20 years, and the increase of the capital investment also have little impact on the growth rate because the savings rate is already high enough. And the increase of the productivity by the technological progress will determine the potential growth rate of Korea``.

Park Joong-Hyun sanjuck@donga.com