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Korean Economy ``2 Percent Growth Rate This Year``

Posted September. 21, 2001 08:37,   


The declining economy that businesses are suffering is expected to get worse. Korea Bank and Samsung Economic Research Institute have changed their predictions for economic recovery from the 4-4 quarter to after next year and lowered their GDP projections from 3-4 percent to 2 percent.

On September 20, Korea Bank investigated 2945 businesses with 2 billion won and above in sales. Its report revealed that after investigating `3-4 quarter BSI`, manufacturing businesses recorded 76 BSI and drastically fell short of the past quarter BSI (86), forecasting a worsening of the economy in the days to come. When the BSI falls short of 100, it means that declining businesses outnumber improved businesses.

The 4-4 quarter`s projected BSI also fell to 89, further reinforcing the pessimistic projections. ``There is a slowdown in every sector and we expect this to continue into the next quarter. Furthermore, we reached a slump before the terrorist attack on the US. It will only get worse from here on.`` a Korea Bank source explained.

In the aftermath of the terrorist attack on the US, exports to the US and consumption have decreased. As a result, the number of research institutes lowering the GDP growth rate are increasing.

Hong Soon-Young, PhD, of Samsung Economic Research Institute predicted, ``The present GDP growth rate in the current 3-4 quarter is projected to be 0 percent from the former 1.5 percent. In the case that the terrorist crisis becomes long-term, the growth rate can fall in the negative. The annual growth rate will decrease from 3 percent to 2 percent.``

Finance Research Institute`s Chung Han-Young observed, ``Although Korea Bank reduced the call interest rate 0.5 percent, consumption and investment continue to decrease while export has sharply declined. A stagnant economic growth appears inevitable.``

Korea Development Institute`s head of the macro-economy team, Kim Joon-Il also stated, ``The growth rate will fall at least 1 percent due to the recent terrorist attack. Considering the industrial production trend during August and the aftermath of the terrorist attack, we plan to adjust our economic predictions around mid-October.``

Lee Heon-Jin mungchii@donga.com