BOK chief warns of negative growth for 2009

SEOUL, Jan. 30 (Yonhap) -- The South Korean economy will likely shrink in 2009 unless economic conditions improve significantly in the first half, the top central banker warned Friday, pledging to focus the nation's monetary policy on an economic recovery.

Asia's fourth-largest economy contracted 5.6 percent last quarter from three
months earlier and is widely expected to log negative growth this quarter,
lapsing into a recession, or two straight quarters of quarterly decline.
"If there are no major improvements in the first and second quarters, it is
certain that the Korean economy will post negative growth this year," Bank of
Korea (BOK) Gov. Lee Seong-tae said in a meeting with business executives.
"But if first-half economic growth is better than that for the fourth quarter of
2008, it is not certain whether the country's economy will expand or fall this
year."
The BOK predicted last month that the local economy will grow 2 percent this
year. The government is targeting 3 percent for 2009, but many experts say
economic growth will likely fall to the 1-percent range this year, with global
investment banks expecting a recession for the first time in more than a decade.
"The BOK will adjust the timing and scale of key interest rate changes to
economic and financial market situations," Lee said, adding that the central bank
will more actively pour liquidity into the financial system to help funds flow
more smoothly and ease a credit crunch.
Since October, the BOK has cut its key interest rate by 2.75 percentage points to
a record low of 2.5 percent in a bid to prop up the cooling economy.
The BOK has poured more than 19 trillion won (US$13.8 billion) in local currency
liquidity into the financial system since September.
Local banks have been increasingly wary of providing more loans to households and
smaller firms as the slowing economy and the credit crunch are jacking up the
amount of bad loans.
sooyeon@yna.co.kr
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