Think Tanks Warn Against Rosy Economic Forecasts

The heads of 12 state-run and private think tanks yesterday agreed that it is premature to predict a rosy economic future for Korea.

They forecast a "U-shaped recovery" in which the economy slowly recovers after a protracted recession. On the controversy over excess liquidity, the majority of participants said the government should maintain its crisis management policies.

The Knowledge Economy Ministry said the think tank heads had a meeting with Knowledge Economy Minister Lee Yoon-ho in central Seoul yesterday. The talks sought to promote a better understanding of economic conditions and come up with countermeasures at a time when many people believe signs of recovery have appeared.

Korea Institute for Industrial Economics & Trade President Oh Sang-bong said, “The pace of Korea’s economic slump has slowed down a bit, but it`s still premature to predict the bottom or the start of recovery. Korea’s economy will see a ‘U-shaped` rather than a ‘V-shaped` recovery."

Others agreed with Oh`s argument.

On the controversy over excess market liquidity, the majority of participants said the government should maintain its crisis management policies, citing lack of currency circulation and demand recovery. The prices of oil and raw materials could increase but are unlikely to skyrocket as they did last year, they said.

Experts urged Korea to prevent the won from rebounding too sharply and encourage domestic corporations to advance into global markets more aggressively. They also said effective countermeasures are needed to raise exports since the Korean currency is expected to rise in value, warning of rising trade protectionism abroad.

Obstacles cited as standing in the way of smooth economic recovery in Korea included household debt, unemployment and corporate restructuring.

Also attending the meeting were Korea Development Institute President Hyun Oh-seok; Korea Institute for International Economic Policy President Chae Wook; Korea Energy Economics Institute President Bhang Ki-yeol; Korea Small Business Institute President Jang Jee-jong; LG Economic Research Institute President Kim Ju-hyeong; SK Research Institute for SUPEX Management President Park Oo-kyu; Hyundai Economic Research Institute President Kim Ju-hyun; POSCO Research Institute President Kim Joon-han; Korea Economic Research Institute President Kim Jong-seok; Korea International Trade Association President Lee Gyeong-tae; and Samsung Economic Research Institute’s director for public policy research Hong Sun-young.

achim@donga.com