Financial crisis, global slump to rock S. Korean economy

SEOUL, Nov. 2 (Yonhap) -- The South Korean economy is likely to undergo plunging
exports and anemic domestic demand in the wake of global financial turmoil and a
worldwide business slump, industry sources said Sunday.
The annual growth rate of exports, the backbone of the economy, is expected to
tumble to 14.2 percent for the current quarter from 14.2 percent for the
July-September period, Samsung Economic Research Institute (SERI) predicted.
Making matters worse for Asia's fourth-largest economy, exports are projected to
grow a mere 8.3 percent next year, said SERI, the nation's most prestigious
private economic think tank.
The Korea Institute of Finance painted a gloomier picture, forecasting the growth
rate of South Korea's overseas shipments may drop to 6.1 percent in the coming
year.
"It will be inevitable for South Korean exports to suffer, as the fallout of the
global financial crisis is spilling over into the real sector of the world
economy," said Yoon Sang-ha, a researcher at LG Economic Research Institute.
On top of weakening exports, South Korea may suffer from a series of bankruptcies
by construction companies, which could sap already flaccid consumer spending
further, experts predicted.
With the demand for apartments hitting bottom, several mid-sized companies are
said to be on the verge of bankruptcy.
In an effort to prop up the construction sector and help builders tide over their
current cash crunches, the government announced in mid-October that it will buy
unsold apartments and land from them.
Slackening exports and weak domestic demand are weighing on the nation's
industrial activity and the economy's growth.
The seasonally adjusted index for industrial activity fell 0.8 percent in
September from a year earlier, the first contraction since September 2001,
according to the National Statistical Office.
In the third quarter, the South Korean economy grew 3.9 percent from the same
period a year earlier, far lower than the Bank of Korea's estimate of a low
4-percent advance.
With signs of an economic slump materializing, the growth rate of the economy for
the October-December period is expected to be even worse than in the third
quarter, the central bank said.