S. Korean economy forecast to grow 3.3 pct in 2009: KDI

SEOUL, Nov. 12 (Yonhap) -- South Korea's economy is expected to grow 3.3 percent
in 2009, falling far short of the government's target, as prolonged financial
turmoil will dent consumption and exports, a state think tank said Wednesday.
Asia's fourth-largest economy is forecast to expand 2.1 percent in the first half
but improve later with the growth rate to be 4.4 percent in the second half, the
Korea Development Institute (KDI) said in its semi-annual economic outlook
report.
The 2009 growth projection is below a 4-percent expansion target, based on which
the government crafted its budget plan for next year. The institute, meanwhile,
expected a 4.2 percent growth for this year.
"Our economy is fast slowing down as the negative impact of global financial
crisis is spilling over into other areas," the institute said. "The turbulence
will also dampen the world economy, posing a major downside risk for exports."
The KDI figures are based on the assumption that the world economy will expand
around 2.5 percent and crude oil will be traded at $70 per barrel next year.
The downbeat forecast comes as South Korea's government has been striving to
cushion the impact of the U.S.-sparked financial crisis with a raft of
stabilization measures including US$100 billion worth of state guarantees for
banks' foreign debts.
Last week, the Finance Ministry unveiled a stimulus package valued at 14 trillion
won ($10.2 billion) to kick-start the slumping economy with expanded fiscal
spending and tax incentives.
The local economy, however, is showing many signs of a marked slowdown, with
gross domestic product expanding at its slowest pace in four years during the
third quarter, according to the central bank.
Domestic consumption and employment rates were also in the doldrums on a bleak
economic outlook.
Consumer sales in September declined 2 percent from a year earlier, while the
number of new jobs last month stood at 112,000, the lowest in 43 months and short
of the government's annual target of 200,000.
Exports, the nation's chief economic growth engine, also slowed sharply. October
exports grew 10 percent to $37.8 billion from a year earlier but decelerated from
a 22.9 percent advance a year earlier.
The KDI said that the global financial instability will be a "burden" for the
local economy "for the time being" and that exports will also be affected in the
process.
One bright spot for South Korea's economy is falling oil and commodity prices,
the KDI said. The price of Dubai crude, South Korea's benchmark, has fallen by
more than half since peaking in mid-July. The decline is expected to lead to an
improvement in the nation's current account balance.
The KDI forecast that the nation will post an $8.6 billion account surplus next
year, a reversal from this year's estimated loss of $8.2 billion. Consumer price
growth was also projected to slow to 3.6 percent from this year's average of 4.8
percent.
The slumping job market, however, is dragging on the nation's economy. The
institute forecast that the nation's jobless rate will increase to 3.6 percent
next year from an estimated 3.2 percent for this year.
With the local financial market and economy still under heavy pressure from
global turbulence, the KDI suggested the government take "expansionary" fiscal
and monetary polices.
"It will be a key to shore up market confidence in the financial system, and
efforts should also be made to enhance the overall transparency," the institute
said. "Expansionary fiscal and monetary polices should be simultaneously pursued
to induce a soft landing of the real economy."
kokobj@yna.co.kr
(END)