``Raw Material Prices Skyrocket . . . Worldwide Recession Possible``

Both at home and abroad, economic research institutes are successively issuing pessimistic predictions. They project that due to the terrorist attack on the U.S., the international economy will take longer to recover and that economic slowdown is inevitable for Korea.

The Korea Development Instituted stated on the 16th, ``If the effects of U.S. retaliation spreads across Western countries and Arab nations, the global economy will enter a stagnant period.`` and ordered preparations for stagflation which combines economic stagnation and inflation.

The international investment bank Stanley Morgan announced that there is a high possibility for a 0.5 percent drop in the global economic growth rate this year due to the recent incident.

▽ Current Stream of Pessimistic Predictions = Korean economic research institutes are saying that the Korea`s economic recovery will depend on the degree and length in time of the U.S. retaliation, but that it should be prepared for at least a delay of 3 to 6 months in recovery time.

KDI stated in the monthly journal `East Asian Economy`, ``As seen during the 1990 Gulf War, increasing tensions in the middle east will make oil and raw material prices skyrocket and lead to a global recession.`` KDI noted that domestic trade has become unstable due to the destruction of the American financial system and air flights may decline due to increased security measures.

Samsung Economic Research Institute observed, ``Due to the recent terrorist attack, the Korean economy will suffer a three-fold ailment: △ Global economic decline △ Rise in oil prices △ Weakening of the dollar.`` and predicted that it will be difficult to recover by the middle of next year.

LG Economic Research Institute warned that if the situation gets worse due to a war, there will be a severe decline in exports and investments, finishing this year`s economic growth rate at 0.1 percent.

▽ Overly Pessimistic Predictions = The International Financial Center predicted that the recent events have a large negative impact on consumption and investments. On the positive side, the IFC pointed out that increase in financial expenditure and other measures taken by the US government in its economic policy and mutual cooperation with other principal nations will stimulate economic recovery.

The American credit assessment organization Standard and Poors (S&P) predicted, ``Although the American economy is experiencing much chaos following the terrorist attack, this is a very temporary phenomena and it will regain normalcy very soon.``

``Although the attack will have a costly impact on insurance companies, they are financially sound enterprises and will be able to overcome the costs. Private security and communication corporations will experience an economic boom for the next several months.`` stated S&P.

Park Won-Jae parkwj@donga.com