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Economic Indicators Sending Alarming Signals

Posted March. 23, 2007 07:08,   


“Korea is not likely to develop into an advanced country.”

“Korea could fall into a financial crisis caused by mortgage loans.”

Various indicators and forecasts on the Korean economy are gloomy.

Although high-ranking government officials tried to play down the mounting pessimism, saying, “We don’t agree with the negative forecasts,” concern over the economy doesn’t seem to be disappearing easily.

Hyundai Research Institute, one of the nation’s leading thinktank, warned in its report titled, “Korean Economy Falling into a Developing Country Hole” on March 22, “There is a possibility that Korea will stay as a developing economy forever with the gap with advanced countries unfilled.”

The report said that the income gap will not be narrowed as developed economies’ per capita income has already reached $30,000, while Korea’s will reach $20,000 later this year.

The Ministry of Finance and Economy (MOFE) reported that the deficit in special revenue under the government, which shows the government’s financial balance, posted 10.8 trillion won, recording a deficit three years in a row since 2004. The figure indicates that the government’s spending excessively.

Also, LG Economic Research Institute analyzed in its report released on March 22, “Korean households should repay the principal and interest on mortgage loans worth more than 100 trillion won this year. The risk of insolvency is higher than ever due to various factors such as rising interest rates and tightened loan standards.”

Companies are also feeling the effects of the sluggish economy.

According to a survey by the Korea Chamber of Commerce and Industry on business sentiment over the economy and future challenges, 76.5 percent of companies that participated in the survey said that the economy’s current status is “in stagnation,” and 9.8 percent said it was “back into stagnation after recovering.” In other words, 86.3 percent of the respondents feel the economy is sluggish.

Vice Minister of the MOFE Kim Seok-dong said, “The government does not agree with the view that the Korean economy is in trouble. There will be no economic crisis created by the financial market.”

Regarding the recent remarks of Lee Kun-hee, Samsung Group Chairman, who said, “The Korean economy will face serious challenges 4 or 6 years later,” Kim Young-ju, Minister of Commerce, Industry and Energy, said, “Raising voices and blaming each other over concerns on the economy will do nothing to boost it.”

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