S. Korea`s growth outlook to be trimmed amid economic recession woes: sources

SEOUL, Feb. 1 (Yonhap) -- South Korea should slash its growth target for this
year, reflecting the economic slowdown that is feared to accelerate amid
deepening global recession woes, government and central bank officials said
Sunday.
The downgrade would come on the heels of revisions by major think tanks, which
trimmed their projections for Asia's fourth-largest economy to the 1-percent
range. Many of them are predicting the first recession in more than a decade.
In its annual policy blueprint late last year, the finance ministry aimed to
achieve a growth rate of 3 percent this year. Meanwhile, the Bank of Korea (BOK),
the nation's central bank, predicted a 2 percent advance, compared with 2.5
percent growth last year.
"It has become meaningless to stick to the growth objective, as we have confirmed
that a severe economic downturn is taking place," a ministry official said on
condition of anonymity. "We need to reflect the latest economic conditions, and
revising down the growth target is inevitable."
He didn't provide a detailed figure, but sources say the downgraded growth target
will be around 1 percent. However, it remains to be seen whether the government
will announce the revised growth targets.
Observers say the ministry might unveil its latest prediction during the upcoming
confirmation hearing of finance minster-designate Yoon Jeung-hyun or his first
press briefing, to be held after his inauguration.
The BOK also considers revising down its earlier projection to near zero percent,
with its changed prediction likely to be announced in a few months, according to
bank officials.
The financial turmoil, which started in mid-September in the U.S., is taking a
heavy toll on South Korea's real economy.
Exports were hit hard by the global economic slowdown as recessions in the U.S.,
Japan and European nations reduced demand for Korean goods. In December, overseas
shipments dropped 17.4 percent from a year earlier, government data showed.
Faltering exports led to a sharp decline in production. According to the National
Statistical Office, the nation's industrial output shrank at the fastest pace
ever in December.
Overseas trade conditions will not likely turn around for a considerable period,
boding ill for the nation's export-driven economy. The International Monetary
Fund predicts the global economy will grow 0.5 percent this year, the lowest rate
since World War II. Its original estimate was 2.2 percent.
On the domestic front, companies are scaling back investment and recruitment,
making it tougher for people to land stable jobs. In December, the economy lost
12,000 jobs, the first job contraction in more than five years.
On Friday, Bank of Korea (BOK) Gov. Lee Seong-tae said it is "certain" that the
Korean economy will post negative growth for this year, barring significant
improvements in economic conditions in the first half.
The government and the central bank are joining hands to kick-start the slowing
economy with a raft of economic stimulus measures including tax cuts, expanded
fiscal spending and aggressive rate cuts.
In January, the BOK cut the key interest rate by half a percentage point to a
record low of 2.5 percent, the fifth reduction in three months. Since October,
the bank has trimmed the rate by a combined 2.75 percentage points.
Observers say that it is a "must" for the central bank to opt for a further late
cut. The BOK is to hold a rate-setting meeting Feb. 12.
"The economic crisis this time will likely hit its lowest point in the second
quarter," a government official said. "April and May might be the worst time
period for our economy."
kokobj@yna.co.kr
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