No Need of Additional Increase of Interest Rate

On the 25th, IMF estimated that Korea would achieve 5.9% of economic growth rate in next year. The estimation is lower than the rate of this year (6.3% estimation) by 0.4%, but is higher than the rate of next year (5.5%) estimated in April by 0.4%.

At that day, in the IMF report ‘Report for Economic Forecast for the Second Half of 2002’, “the economic growth rates of US and Europe don’t reach the expectation, so the world economy is expected to be lower than expectation in the half of this year and in next year” and estimated the growth rate of world economy in next year at 3.7% that is lower than April estimation of 4.0% by 0.3%.

Particularly, IMF adjusted US and Europe economic growth rates downward to 2.6% and 2.3% respectively because they are expected to delay in economic recovery. IMF estimated their growth rates 3.4% and 2.9% respectively.

IMF showed optimistic view on Korean economy relatively. It estimated the highest rate of 6.3% in this year and 5.9% in next year among new developing countries except China.

IMF, however, commented, “Korea is expected to be instable in economy because of the increase of housing price and consumer price” and added “as external instability is getting bigger and bigger, so additional increase of interest rate may not need for a while”.

IMF also advised to reduce the dependence on US economy as the recovery of US economy is delayed.

IMF estimated that Japan would recover economy with 1.1% growth rate in next year from minus 0.5% in this year, and China would keep high growth rate of 7.2% in next year from 7.5% in this year.

Kwang-Hyun Kim Ki-Heung Han kkh@donga.com eligius@donga.com