S. Korea`s economy may bottom out in late 2009

SEOUL, Feb. 12 (Yonhap) -- South Korea's economy may begin to modestly recover in
late 2009 if the government makes prudent policy decisions, the chief economist
for the nation's largest business lobby said Thursday.
"The economy will face a critical point in the first half of this year," Kim
Jong-seok, head of the Korea Economic Research Institute, a research unit of the
Federation of Korean Industries, told a forum audience.
Speaking to local business leaders, Kim called on the government to use every
possible policy option, including massive fiscal spending, deregulation and
investment in construction, to lift the economy out of a recession.
"If so, the economy will be able to see the light by late this year," Kim said.
Hit by the deepening global economic slump, South Korea's export-oriented economy
is headed for its first recession in 11 years.
Earlier this week, new Finance Minister Yoon Jeung-hyun predicted the economy
would shrink two percent this year, as exports have fallen at a rapid pace and
domestic demand remains sluggish.
In the final quarter of 2008, the economy contracted 3.4 percent from the same
period a year ago, the Bank of Korea said last month. Last year, the economy
expanded just 2.5 percent, compared with 5.1 percent growth in 2007.
The nation's monetary policy took on new urgency on the same day as the Bank of
Korea cut its key interest rates by 50 basis points to a record low of two
percent. Since October last year, the central bank has slashed interest rates by
a total of 3.25 percentage points.
So far, the government has planned to spend 35 trillion won (US$25.1 billion) by
the end of this year to prop up the economy.
Kim said the government's stimulus package should focus on creating jobs.
"Job creation is the only way to activate domestic demand and prevent the economy
from falling into an even sharper downturn," Kim said.
On Wednesday, government data showed about 103,000 jobs disappeared last month,
the biggest monthly job loss in more than five years.
Still, the jobless rate appeared to be stabilizing at 3.3 percent, but some
analysts say the worst has yet to come.
"The unemployment rate has yet to fully reflect the current weak state of the
economy," said Daniel Melser, senior economist with Moody's Economy.com, in a
report.
"Even the Korean government, which tends to paint a Panglossian picture, is
predicting that 200,000 jobs will be lost over the coming year. A more realistic
prediction is three or four times that number," Melser said.
(END)