ID :
51117
Wed, 03/18/2009 - 11:10
Auther :
Shortlink :
https://www.oananews.org//node/51117
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S. Korea's facility investment to contract further in 2009: think tanks
SEOUL, March 18 (Yonhap) -- South Korea's facility investment is expected to shrink at a faster pace in 2009 as companies scale back spending amid the global economic slump, major think tanks said Wednesday.
The country's facility investment declined 2 percent last year from a year
earlier, with fourth-quarter corporate expenditure on equipment and plants
falling 14 percent. The spending plunged even more in January, dropping 25.3
percent from a year earlier, according to data by the central bank and the
government.
Major think tanks expect a further deterioration in the coming quarters, with
many predicting a double-digit contraction as demand remains weak in both
domestic and overseas markets that are being hit by recession woes.
The LG Economic Research Institute expects companies' facility investment to
decline 14.7 percent this year, while the Korea Economic Research Institute
expected an 11.5 percent contraction.
The state-run Korea Development Institute echoed the pessimism, forecasting an
annual decline of 7.7 percent in facility investment this year.
"In our January report, we expected a 7.7 percent contraction but things have
changed since then as more negative factors emerged, such as declining global
trade and the worsening financial status of foreign banks," a KDI researcher
said. "The outlook for facility investment could worsen down the road."
If the forecasts are accurate, it would mark the first contraction for two
consecutive months since the 1997-98 Asian financial crisis. Investment fell 9.6
percent on-year in 1997 and tumbled 42.3 percent in 1998, the central bank said.
The bleak outlook comes as the South Korean economy will likely contract 2
percent this year, the first minus growth in 11 years due to faltering exports
and domestic demand.
The International Monetary Fund said that the global economy will contract 0.6
percent this year, reversing its previous projection of a 0.5 percent growth. The
World Bank also expected minus growth for this year and the sharpest decline in
global trade in 80 years.
South Korean manufacturers have begun to curtail production and employment in the
face of declining demand and growing uncertainty over economic conditions.
According to an earlier poll by the Federation of Korean Industries, a major
business lobby group, the nation's top 600 companies plan to invest a combined
86.7 trillion won (US$61.3 billion) this year, down 2.5 percent from a year
earlier and marking the first contraction in eight years.
"Global economic conditions are becoming so uncertain that we are currently
relying on short-term management strategies. We haven't decided on our yearly
investment plans," a Samsung Group official said.
The South Korean government has unveiled a raft of stimulus measures including
tax cuts and additional fiscal spending aimed at bolstering domestic demand and
corporate investment.
On Feb. 24, Finance Minister Yoon Jeung-hyun met business leaders, urging them to
step up employment and investment as part of efforts to reinvigorate the slipping
economy.
Given the protracted slump in major economies, however, corporate investment will
likely remain sluggish for the time being, observers say, adding that a full
recovery to levels of 5 percent growth seen before the downturn wont be seen
until 2011.
The country's facility investment declined 2 percent last year from a year
earlier, with fourth-quarter corporate expenditure on equipment and plants
falling 14 percent. The spending plunged even more in January, dropping 25.3
percent from a year earlier, according to data by the central bank and the
government.
Major think tanks expect a further deterioration in the coming quarters, with
many predicting a double-digit contraction as demand remains weak in both
domestic and overseas markets that are being hit by recession woes.
The LG Economic Research Institute expects companies' facility investment to
decline 14.7 percent this year, while the Korea Economic Research Institute
expected an 11.5 percent contraction.
The state-run Korea Development Institute echoed the pessimism, forecasting an
annual decline of 7.7 percent in facility investment this year.
"In our January report, we expected a 7.7 percent contraction but things have
changed since then as more negative factors emerged, such as declining global
trade and the worsening financial status of foreign banks," a KDI researcher
said. "The outlook for facility investment could worsen down the road."
If the forecasts are accurate, it would mark the first contraction for two
consecutive months since the 1997-98 Asian financial crisis. Investment fell 9.6
percent on-year in 1997 and tumbled 42.3 percent in 1998, the central bank said.
The bleak outlook comes as the South Korean economy will likely contract 2
percent this year, the first minus growth in 11 years due to faltering exports
and domestic demand.
The International Monetary Fund said that the global economy will contract 0.6
percent this year, reversing its previous projection of a 0.5 percent growth. The
World Bank also expected minus growth for this year and the sharpest decline in
global trade in 80 years.
South Korean manufacturers have begun to curtail production and employment in the
face of declining demand and growing uncertainty over economic conditions.
According to an earlier poll by the Federation of Korean Industries, a major
business lobby group, the nation's top 600 companies plan to invest a combined
86.7 trillion won (US$61.3 billion) this year, down 2.5 percent from a year
earlier and marking the first contraction in eight years.
"Global economic conditions are becoming so uncertain that we are currently
relying on short-term management strategies. We haven't decided on our yearly
investment plans," a Samsung Group official said.
The South Korean government has unveiled a raft of stimulus measures including
tax cuts and additional fiscal spending aimed at bolstering domestic demand and
corporate investment.
On Feb. 24, Finance Minister Yoon Jeung-hyun met business leaders, urging them to
step up employment and investment as part of efforts to reinvigorate the slipping
economy.
Given the protracted slump in major economies, however, corporate investment will
likely remain sluggish for the time being, observers say, adding that a full
recovery to levels of 5 percent growth seen before the downturn wont be seen
until 2011.
