ID :
43596
Sun, 02/01/2009 - 19:28
Auther :
Shortlink :
https://www.oananews.org//node/43596
The shortlink copeid
S. Korea`s consumer demand may not recover until 2010
SEOUL, Feb. 1 (Yonhap) -- South Korea's consumer demand may not pick up until the
second half of 2010 as households move to reduce outstanding debt, a report by a
local financial think tank said Sunday.
The Korea Institute of Finance (KIF) report speculated that economic
uncertainties are causing people to control spending and reduce exposure to risk,
exerting negative influence on demand.
South Korea's economy may be hard-pressed to pull off even 2 percent growth this
year as the global slump hurt exports, investment and domestic spending.
It added that for South Korean households that increased borrowing from the third
quarter of 2007 to the fourth quarter of last year, it is natural to start
reducing debt.
"This process could take up to 18 months and cause people to hold off on most
purchases,' said Shyn Yong-sang, a KIF researcher.
The expert said the biggest cause for the falling off of demand could be found in
plummeting asset prices, faltering exports that account for roughly 35 percent of
the gross domestic output and employment concerns.
"Job security issues and a possible drop in overall wages can fuel a drop in
consumption that could pose serious problems for the entire economy," Shyn said.
To ease the "shock" the researcher said lowering interest rates is a viable
option to reduce the financial burden while measures by the government to invest
in social overhead capital and research and development could also help.
Studies have shown that cutting key interest rates by 1 percentage point can help
fuel consumption by 0.2 percentage point.
South Korea's central bank on Jan. 9 slashed its key interest rate to a record
low 2.5 percent in an effort to keep the economy from sliding into a recession.
The think tank, meanwhile, said that in order to prevent lower income families
from going bankrupt, it may be advisable to increase state-supported job training
programs and provide unemployment benefits that can reduce the blow to those laid
off amid restructuring programs.
yonngong@yna.co.kr
(END)
second half of 2010 as households move to reduce outstanding debt, a report by a
local financial think tank said Sunday.
The Korea Institute of Finance (KIF) report speculated that economic
uncertainties are causing people to control spending and reduce exposure to risk,
exerting negative influence on demand.
South Korea's economy may be hard-pressed to pull off even 2 percent growth this
year as the global slump hurt exports, investment and domestic spending.
It added that for South Korean households that increased borrowing from the third
quarter of 2007 to the fourth quarter of last year, it is natural to start
reducing debt.
"This process could take up to 18 months and cause people to hold off on most
purchases,' said Shyn Yong-sang, a KIF researcher.
The expert said the biggest cause for the falling off of demand could be found in
plummeting asset prices, faltering exports that account for roughly 35 percent of
the gross domestic output and employment concerns.
"Job security issues and a possible drop in overall wages can fuel a drop in
consumption that could pose serious problems for the entire economy," Shyn said.
To ease the "shock" the researcher said lowering interest rates is a viable
option to reduce the financial burden while measures by the government to invest
in social overhead capital and research and development could also help.
Studies have shown that cutting key interest rates by 1 percentage point can help
fuel consumption by 0.2 percentage point.
South Korea's central bank on Jan. 9 slashed its key interest rate to a record
low 2.5 percent in an effort to keep the economy from sliding into a recession.
The think tank, meanwhile, said that in order to prevent lower income families
from going bankrupt, it may be advisable to increase state-supported job training
programs and provide unemployment benefits that can reduce the blow to those laid
off amid restructuring programs.
yonngong@yna.co.kr
(END)
