ID :
43998
Tue, 02/03/2009 - 19:50
Auther :
Shortlink :
https://www.oananews.org//node/43998
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IMF predicts S. Korean economy will shrink 4 pct this year
SEOUL, Feb. 3 (Yonhap) -- The International Monetary Fund (IMF) predicted Tuesday the South Korean economy will shrink 4 percent this year, sharply downgrading its earlier projection, citing weak domestic demand and exports amid the global economic slump.
Asia's fourth-largest economy, however, will likely accelerate its recovery from
the second half and is expected to grow 4.2 percent in 2010, marking the largest
turnaround among world economies, the global financial body said in its official
outlook report on South Korea.
The recovery will depend much on how fast the global economy will turn around, it
added.
The IMF earlier predicted a 2 percent expansion this year for South Korea. Last
week, it forecast that the global economy would expand by just 0.5 percent this
year, the slowest pace since World War II, compared with an earlier projection of
2.2 percent.
The IMF joined a growing number of think tanks and investment banks that have
sharply lowered their outlooks for South Korea in recent weeks to negative
growth.
Switzerland-based UBS predicted the economy would shrink 3 percent this year.
Moody's Investors Service lowered its outlook to minus growth of 2 percent, while
Fitch Ratings expected a 2.4 percent contraction. Standard & Poor's also lowered
its outlook for South Korea to zero percent.
The downgrade comes despite concerted efforts by the government and the central
bank over the past months to kick-start the slumping economy with diverse
measures including tax cuts, expanded fiscal spending and aggressive rate
reductions.
The government currently aims to achieve 3 percent expansion after taking into
account the impact of such measures, while the Bank of Korea, the nation's
central bank, predicts growth of 2 percent, compared with 2.5 percent growth last
year.
Analysts cautioned against reading too much into the IMF's growth projection for
this year.
"The government and the central bank have unveiled such measures but I doubt that
the IMF has fully taken into consideration those efforts," said Lee Sung-kwon, an
analyst at Goodmorning Shinhan Securities.
Speaking at a news conference held after the report was announced, IMF Managing
Director Dominique Strauss-Kahn said there is "every reason to be skeptical about
the figure."
But he advised South Korea to "look more carefully at those figures" that predict
a robust recovery of 4.2 percent next year rather than fixating on this year's
growth contraction.
The IMF remained optimistic over the long-term outlook for South Korea, citing
the nation's strong fundamentals, the government's comprehensive and
forward-looking approach to the global turmoil and other economic-stimulus
measures.
However, South Korea's export-driven economy is facing a bumpy road as the
ongoing global economic downturn is sending the nation's important markets such
as the U.S. and the EU into recession, observers say.
According to the IMF forecast, the U.S. economy, the world's largest, will
contract 1.6 percent for this year, compared with minus 0.7 percent growth
predicted in November.
Japan's economy will also shrink 2.6 percent, compared with an earlier 0.2
percent contraction, while China's growth will grow 6.7 percent compared to a
previously-projected 8.5 percent advance.
Asia's fourth-largest economy, however, will likely accelerate its recovery from
the second half and is expected to grow 4.2 percent in 2010, marking the largest
turnaround among world economies, the global financial body said in its official
outlook report on South Korea.
The recovery will depend much on how fast the global economy will turn around, it
added.
The IMF earlier predicted a 2 percent expansion this year for South Korea. Last
week, it forecast that the global economy would expand by just 0.5 percent this
year, the slowest pace since World War II, compared with an earlier projection of
2.2 percent.
The IMF joined a growing number of think tanks and investment banks that have
sharply lowered their outlooks for South Korea in recent weeks to negative
growth.
Switzerland-based UBS predicted the economy would shrink 3 percent this year.
Moody's Investors Service lowered its outlook to minus growth of 2 percent, while
Fitch Ratings expected a 2.4 percent contraction. Standard & Poor's also lowered
its outlook for South Korea to zero percent.
The downgrade comes despite concerted efforts by the government and the central
bank over the past months to kick-start the slumping economy with diverse
measures including tax cuts, expanded fiscal spending and aggressive rate
reductions.
The government currently aims to achieve 3 percent expansion after taking into
account the impact of such measures, while the Bank of Korea, the nation's
central bank, predicts growth of 2 percent, compared with 2.5 percent growth last
year.
Analysts cautioned against reading too much into the IMF's growth projection for
this year.
"The government and the central bank have unveiled such measures but I doubt that
the IMF has fully taken into consideration those efforts," said Lee Sung-kwon, an
analyst at Goodmorning Shinhan Securities.
Speaking at a news conference held after the report was announced, IMF Managing
Director Dominique Strauss-Kahn said there is "every reason to be skeptical about
the figure."
But he advised South Korea to "look more carefully at those figures" that predict
a robust recovery of 4.2 percent next year rather than fixating on this year's
growth contraction.
The IMF remained optimistic over the long-term outlook for South Korea, citing
the nation's strong fundamentals, the government's comprehensive and
forward-looking approach to the global turmoil and other economic-stimulus
measures.
However, South Korea's export-driven economy is facing a bumpy road as the
ongoing global economic downturn is sending the nation's important markets such
as the U.S. and the EU into recession, observers say.
According to the IMF forecast, the U.S. economy, the world's largest, will
contract 1.6 percent for this year, compared with minus 0.7 percent growth
predicted in November.
Japan's economy will also shrink 2.6 percent, compared with an earlier 0.2
percent contraction, while China's growth will grow 6.7 percent compared to a
previously-projected 8.5 percent advance.
