S. Korea's economy to grow 0.7 pct this year: think tank

SEOUL, Jan. 21 (Yonhap) -- South Korea's economy will grow 0.7 percent in 2009 on
slumping domestic demand and exports, sharply slowing from the previous year's
estimated 2.8 percent expansion, a state-run think tank said Wednesday.

The estimate is far lower than the central bank's 2-percent prediction and the
government's objective of attaining 3-percent growth. The forecast is based on
the assumption that the global economy will expand around 1 percent.
"Our economy is slipping into a recession phase recently on accelerating
contraction of consumption and anemic export growth, hit by a
faster-than-expected global downturn," the Korea Development Institute said in a
statement.
The KDI said the economy is expected to contract 2.6 percent in the first half of
this year, but will gain some momentum in the following half, rebounding 3.8
percent from a year earlier.
The revision is the latest in a string of downward adjustments by major
investment banks and research institutes for Asia's fourth-largest economy.
Most predicted the economy will slump to the 1-percent range, with some painting
an even bleaker picture, expecting the first recession in more than a decade.
Private-sector consumption will remain sluggish, the institute said. Consumption
will shrink 3.2 percent in the first half before jumping 3.5 percent in the next
half.
Exports will decline 4.2 percent this year, with first-half overseas shipments to
plunge by 10.7 percent from a year earlier. In 2008, the nation's exports jumped
6.2 percent, the institute said.
South Korea will post a current account surplus of US$13.6 billion this year in a
turnaround from the previous year's deficit of $6 billion, according to the
institute.
The jobless rate will also rise to 3.7 percent this year from 3.2 percent a year
ago, boding ill for the already frozen labor market that has been hit by the
global economic recession and ongoing corporate restructuring.
Last month, the economy lost 12,000 jobs, the first job contraction in more than
five years, as companies scaled back on recruitment for fear of worsening
economic conditions. The government aims to create 100,000 jobs this year.
The institute forecast that the labor market will recover from the second half,
but remained pessimistic over whether the economy will be able to generate jobs.
kokobj@yna.co.kr
(END)