KDI, ``Economy Will Grow by 2.2 Percent This Year``

Korea Development Institute (KDI) and worldly known financial institutions, including Goldman Sachs, lowered their growth forecast for this year`s and next year`s Korean economy to 1~2 percent and 3~4 percent respectively.

Apart from this, the Wall Street Journal forecasted that the economic slump that many Asian nations are experiencing at present would be longer than that they experienced during the time of foreign currency crisis.

KDI issued an `economic prospect for the third-quarter` on Oct. 25, where it forecasted that Korea`s Gross National Product (GNP) growth rate would stop at 0.9 percent in the third-quarter (July ~ Sept.) and 1.6 percent in the fourth-quarter (Oct. ~ Dec.), thus marking 2.2 percent growth for the whole year. This figure is much lower than KDI`s forecast of 4 percent growth presented during the first half of this year. KDI also lowered the next year`s economic growth rate to 2.4 percent in the first half and 4.2 percent in the second half, thus 3.3 percent for the whole year.

J.P Morgan, a worldly known investment bank, lowered its forecast of Korea`s economic growth rate from original 2.5 percent to 1.9 percent after the Terrorist Attack on the U.S., and recently lowered the forecast of next year`s growth from 5 percent to 4 percent.

Goldman Sachs lowered the Korea` economic growth rate as well from its original forecast of 3 percent before the Terrorist Attack to 2 percent after the incident, and the forecast of next year from 4.5 percent to 3.5 percent.

KDI predicted that Korea`s exports would remain almost the same, marking 0.3 percent in the third-quarter, -0.8 percent in the fourth-quarter and 0.7 percent in the first half of next year, but would increase in the second half by 8.7 percent. Accordingly, the growth rate in exports will reach 2.1 percent this year and 4.7 percent next year.

In addition, the consumer price index will increase by 4.4 percent, which is a frustration to the government concerned who has attempted to hold it within 4 percent. But the next year`s consumer price index is predicted to go down to 3.0 percent range owning to economic recovery and the stabilization of global raw material prices.

KDI also forecasted that Korea`s current account surplus would fall sharply to 1.8 billion dollars in the second half of this year from 6.7 billion dollars in the first half as a result of declining exports, and thus the total surplus for the year would reach 8.5 billion dollars, far less than the government`s predict of 10 billion dollars.

Park Joong-Hyun sanjuck@donga.com