Leading Think Tank Cuts Growth Forecast to 0.7 Pct.

The leading state-run think tank Korea Development Institute yesterday lowered the country’s growth forecast to 0.7 percent for this year, predicting a big decline in jobs in 2009.

Growth will reach minus 2.6 percent in the first half and 3.8 percent in the second year-on-year.

The think tank’s latest forecast is down from 3.3 percent predicted in November last year.

The Korean government’s 2009 growth forecast is three percent and the Bank of Korea’s two percent.

The institute predicted in November last year that private consumption will increase 2.2 percent this year, but has lowered that figure to 0.1 percent. The forecast for facility investment also dramatically dropped from 1.9 percent to minus 7.7 percent.

Despite the big drop in exports, the think tank said the current account surplus will reach 13.6 billion U.S. dollars this year due to a drop in crude and raw material prices.

On employment prospects, a researcher said, “Annual net growth (in the number of workers) is not likely though the economy will pick up in the second half of the year after a decline in the first.”

Hence, the government’s aim of creating 100,000 jobs is improbable based on the forecast. The institute said unemployment will surge from 3.2 percent last year to 3.7 percent this year.

The think tank advised the government to push restructuring in ailing companies and expand the fiscal budget to overcome the economic slowdown. It also said public funds should be secured in advance through parliamentary approval to defend banks against insolvency.

cha@donga.com