Economists warn Korean economy faces recession next year

SEOUL, Nov. 30 (Yonhap) -- South Korea's economy is feared to be heading for its
first recession in a decade next year as domestic and overseas sales are set to
face further declines, experts said Sunday.
The South Korean economy grew 0.6 percent on-quarter in the July-September
period, posting its slowest pace in four years due to slowing exports and
domestic demand.
"The global economic slump is hurting overseas sales badly, and corporate capital
spending is falling," said Kim Jong-soo, an analyst at NH Investment &
Securities. "All data show that an economic recession is likely imminent."
Industrial output in Asia's fourth-largest economy fell for the first time in 13
months in October due to sluggish exports and domestic demand amid concerns over
a global slowdown, according to a government report released Friday.
Factory production shrank 2.4 percent last month from a year earlier, sharply
slowing from a 6.2 percent on-year advance in September in the nation's first
decline in output since contracting 3.1 percent in September 2007.
The decline in overseas sales is the biggest concern, experts say. The country's
exports, which make up more than half of economic growth, rose 10 percent in
October from a year earlier, the slowest pace in 13 months, as shipments to China
fell for the first time since 2002, the report showed.
"Things may get worse if emerging-market demand cools quickly," said Lee
Sang-jae, an economist at Hyundai Securities Co. "If China's economy cools more,
it will have a more serious impact on the Korean economy. The economy has been
quite dependent on shipments to China."
The SK Research Institute forecast that the nation's exports will decline 2.7
percent next year.
Domestic demand is also cooling faster than expected. Sales of consumer goods
dropped 3.7 percent in October from a year earlier, the sharpest decline since
August 2003, when sales fell 5.9 percent, Friday's report showed.
"The economic slump is accelerating faster than expected," said Lee Jae-joon, a
researcher at the Korea Development Institute. "Despite massive economy-boosting
measures, there is the possibility that the economy may post a minus growth rate
in the first quarter of next year."
Last week, the International Monetary Fund trimmed its growth projection for
South Korea for next year to 2 percent, down from an earlier 3.5 percent
expansion. The Switzerland-based UBS AG offered a more gloomy growth estimate for
South Korea's economy, forecasting the economy will contract 3 percent next year.
The country has suffered three straight quarters of negative growth between 1997
and 1998, when the nation was hit by the unprecedented Asian financial meltdown.
sam@yna.co.kr
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