Posted November. 08, 2008 09:16,
The worsening economy has many economic experts saying Koreas economic growth will fall to around two percent next year, with certain investment banks even predicting a plunge to the one-percent level.
If growth stays under three percent next year, it will be the third time for Korea to see growth of less than three percent since its industrialization movement began in the middle of the 20th century. The countrys first slump came in 1980, when skyrocketing oil prices sent shockwaves throughout the global economy and lowered Koreas growth to minus 1.5 percent. The second was in 1998, when growth rate declined 6.9 percent immediately after the Asian financial crisis.
In its global economy outlook, the International Monetary Fund lowered its economic growth forecast for developed economies such as the United States, the euro zone, Japan, Britain and Canada next year by 0.8 percentage point to minus 0.3 percent, down from 0.5 percent.
This is the first time for the fund to predict minus growth since World War II, but the IMF said this financial ice age will end late next year.
The report also said Asias four emerging economies of Korea, Hong Kong, Singapore, and Taiwan will experience a sharp decrease in exports and grow 2.1 percent next year, cutting the IMFs initial forecast by 1.1 percentage points. Koreas exports grew 10 percent in October, a far cry from growth of 28.7 percent in September. Most of all, major export items such as cars, semiconductors, and computers experienced a significant setback, but exports are expected to slow down drastically at the end of the year.
Even before the IMF announcement, global investment banks forecast that Koreas economic growth will remain between one and two percent next year. Merrill Lynchs outlook is 1.5 percent and that of UBS is 1.1 percent. Korean think tanks are also expected to cut their forecasts.
The Korean government has predicted its economy will grow around three percent next year, but announced Monday that it will raise growth one percentage point to around 4 percent with an economic stimulus package worth 14 trillion won (10.5 billion U.S. dollars).
Bae Min-geun, senior economist at LG Economic Research Institute, said, If economic growth falls from five percent last year to around one percent, the average income of urban workers will fall 5.6 percent and 224,000 jobs will be lost. This will negatively affect consumption and investment, while inviting a surge in suicides and divorces.