Concerns for Slowdown in the Economy

As the country approached the third and fourth quarters (July ~ September) of the fiscal year, domestic demand has slowed down and the rate of economic growth has halted at 5.8% which was below the projected 6.7% goal.

Fortunately export shows a favorable tendency and supports the economic growth but due to many unstable factors such as stagnation in the Japan and US economy and possibility of Iraq-US war have clouded the attainment of annual 6% economic growth projection.

According to assessments, if the export turns unfavorable next year mixed with withering domestic demand it with create an escalating effect and that would signal the genuine economic slump.

On 22nd the Bank of Korea has announced that actual GDP in the third and fourth quarters of the current fiscal year has stop at 5.8% increase compare to previous year.

This result is 0.6% below 6.4% growth in the first and second quarters. 0.9% lower than Bank of Korea’s 6.7% growth projection for third and fourth quarter (July)

Direct causes for slowdown in the economy are due to storm damages and decrease in domestic consumption and investments. The domestic consumption rate in the third quarter is 6.1% compare to second quarter’s 7.6%. In the growth rate in fixed capital investment is mere 0.9% due to decrease is construction investment

In the other hand, the exports have increased extensively and IT related businesses have led the increase with high growth rate. The exports of semiconductors, communication equipments and computers have increased by 21.7% and exceeded over 13.5% of the second quarter.

With the favorable exports in the IT related businesses, the manufacturing sector shows prosperity with 6.7% growth compare to 6.4% in the previous quarter. Especially telecommunication manufacturers have grown 21.7% compare to 17.8% in the previous quarter with the export increase. Other sectors such as Service, communication and Finance Insurance have increased by 9%. Construction sector has decreased 2.9% due to slump in civil engineering and so is agricultural sector by 4.5% due to storm damages.

The actual GDI has halted at 3.1% compared to the previous year and is below the GDP growth rate.

Kwu-Jin Lim mhjh22@donga.com