Korea`s Projected Economic Growth Rate Lowered to 5%

Standard & Poors (S&P), the world`s famous credit rating agency, and Economist Intelligence Unit (EIU), a U.K. based research institute under the economic magazine Economist, downgraded the projected economic growth rate of Korea for this year.

In particular, the EIU lowered the growth rate of Korea for the second time this year. Moreover, the rate is close to nearly 4.0%, causing concerns about speeding up a possible ‘domino effect of downgrading the growth rate.’

In the report titled ‘Korea`s credit trend and the search for a way to sustained growth,’ S&P forecasted that Korea’s growth rate for 2003 can be lowered to 5.0% as factors such as a possible war in Iraq, rising oil price, economic slowdown in its trade partners, and falling domestic spending are becoming reality. Last year, the credit rating agency had projected the nation’s growth rate for this year at 5.7%.

S&P, however, made clear that it would leave Korea’s credit rating at ‘A- Stable,’ saying, “The Korean as well as global economy is expected to slow down, but the credit condition remains the same because the economic fundamental including the credit base of the Korean government and the private sector has been improved.”

“Apparently, the rising security concerns due to North Korea’s nuclear programs limit the possibility of raising the credit rating. But the current credit rating of Korean companies will be able to offset such concerns,” the agency added.

The EIU announced the same day that it would slash Korea’s projected economic growth rate for this year 0.5% to 4.1%, from 4.6%. The economic research institute forecasted that Korea’s growth rate would be recovered to 5.3% next year, adding, “From the second half of this year the oil price will fall and the rising consumer price will slow.”

The institute announced Jan. 28 that it would lower the rate from the previous 5.4% to 4.6%. Therefore its move this time is the second one only in a month.

Meanwhile, the government is set to hold a meeting presided by the new Prime Minister and Minister of Finance and Economy as early as Mar. 4 to check the economic trend and come up with a countermeasure. “Although this meeting is for economy-related ministers to get acquainted, it will be expanded to a comprehensive one checking up all the economic pending issues, considering the serious economic situation with the shrinking domestic spending and the red light to the export,” said the ministry officials.

Kwang-Am Cheon iam@donga.com