Korean Economy on Alert for Slow Growth

Deputy Prime Minister and Minister of Finance and Economy Lee Hun-jai projected that the gross domestic product (GDP) growth rate of the third quarter (July-September) and the fourth quarter (October-December) of this year may fall below the five percent level.

At the regular briefing held at the Gwacheon government complex on November 12, the deputy prime minister said, “The recovery of domestic consumption was expected to gain momentum from September, but with non-economic and external factors such as the oil price hike, it did not reach the desired speed while the export growth slowed down as well.”

The deputy prime minister added, “The annual growth this year is expected to reach the five percent level at best.” The growth rate for the first quarter (January-March) and the second quarter (April-June) stood at 5.3 percent and 5.5 percent, respectively.

Regarding the “Korean Style New Deal,” an extensive investment policy, the minister said, “The Korean economy is like a flu patient,” and stressed, “For a patient with low stamina, we need to treat symptoms using various aids such as a fever remedy or a cough medicine.”

Meanwhile, American financial corporation Goldman Sachs adjusted Korea’s projected GDP growth rate for next year from the previous 4.0 percent to 3.7 percent on November 12.

Goldman Sachs explained through an investment reported released on that day that “The Korean economy cannot avoid an economic slowdown as its export growth is losing momentum, and the domestic consumption recovery is becoming out of sight with the won gaining more strength (decreased exchange rate).”

In addition, the financial firm said, “With its sovereign debt (including loans on government guarantees) reaching 35 percent of the nation’s GDP, there will be some difficulties for the Korean government to roll out an aggressive expansionary fiscal policy.”

Chi-Young Shin Jin-Hup Song higgledy@donga.com jinhup@donga.com