‘Korea’s Economic Growth Could Fall to 1.2%’

The world’s leading investment banks have lowered their forecasts for Korea’s economic growth next year to 1.2 percent.

Their growth predictions for Korea have fallen more than three percentage points since September, when the U.S.-led financial crisis hit the world. This means Korea’s export-driven economy will be hit hard by the global economic slowdown.

The United States, Japan, Europe and major Asian countries are expected to see negative growth next year, so Korea is seen to be in better shape. Next year’s forecast for the Korean economy, however, could aggravate further.

The Strategy and Finance Ministry and the Korea Center for International Finance said yesterday that economic forecasts for Korea released by Goldman Sachs, JPMorgan, Morgan Stanley, UBS, Standard Chartered, Barclays and Merrill Lynch averaged 1.2 percent as of Nov. 30.

By bank, Goldman Sachs predicted growth of 3.1 percent next year, but most of the seven banks said it will not surpass two percent. Worse, UBS even said Korea’s economy will decline three percent.

The economic outlook had fallen from 4.3 percent Sept. 30 (the forecast average of nine banks) to three percent Oct. 31 (eight banks).

Among domestic financial institutions, Samsung Securities was the first to forecast negative growth next year. In a report released last week, Samsung said growth will be minus 0.2 percent next year for the first time since 1998, when the currency crisis hit the nation.

Attention is now drawn to the Korean government’s growth forecast when it announces its economic policies around the end of the year or early next year. When the Strategy and Finance Ministry submitted a revised budget bill last month, it predicted growth of around four percent next year.

The ministry, however, did an about-face by lowering its forecast. In an inquiry at the National Assembly, Strategy and Finance Minister Kang Man-soo said the growth rate could range between 2.5 and 2.9 percent.

In a news conference for foreign journalists yesterday, Knowledge Economy Minister Lee Youn-ho said, “I think three percent will be the mark. If the global economy performs better than expected, Korea’s economy will grow more than three percent but could fall below three percent if global economic conditions worsen.”

Advanced economies such as those of the United States, Japan and Europe are already bracing for minus growth. Similarly, Taiwan, Singapore and Hong Kong could also face minus growth due to heavy dependence on trade and finance.

Investment banks lowered their economic forecasts for Hong Kong from four percent in September to 2.3 percent in October and 0.1 percent last month. Over the same period, their forecasts for Taiwan have decreased from 4.4 percent to 2.7 percent and 0.1 percent, and those for Singapore from 3.7 percent to 1.4 percent, and 1.1 percent.

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