Korean Economy Likely to Recover in Fourth Quarter

There is widespread agreement that the Korean economy is likely to hit bottom soon.

Along with this, the global economy, one of the significant variables affecting the nation`s economy, is showing signs of recovery.

“There isn`t a great deal of evidence pointing to the fact that economic recovery is underway but it is likely to hit the bottom soon,” said Deputy Prime Minister and Finance and Economy Minister Kim Jin-pyo in a press conference Wednesday. “The economy will recover rapidly in the fourth quarter,” he added.

“When it hits bottom, the speed and range of recovery will depend on the stabilization of labor-management disputes and social conflicts,” he stressed.

Mr. Kim explained that an active Chinese economy may boost the Korean economy, saying “Exports to China in July increased 45 percent from a year ago.”

The Korea Development Institute (KDI) also announced in a recent report that the latest economic indicators suggest the economy is still in a slump but will not worsen further.

“As overseas economic conditions improve, growing expectations over economic recovery are reflected through financial indicators,” the KDI report explained.

The growth rate of gross domestic production (GDP) in the U.S. marked 2.4 percent for the second quarter this year, up 1 percent from 1.4 percent for the first quarter, the KDI report added.

On top of this, industrial production, a leading economic indicator (LEI), facility investment, and individual spending are slowly improving.

Tied into this is the fact that the Japanese economy shows signs of improvement in stock and investment related indexes although it is still mired in recession due to a slump in exports and decreasing industrial production. As SARS fears abate, the Chinese economy`s production and spending are rising amid growing exports and investment. However, it is still too premature to talk about economic recovery due to some unsettling factors such as unemployment, a rising trade deficit in the U.S. and a falling growth rate of Chinese GDP.

Kwang-Am Cheon iam@donga.com