S. Korean economy may face double dip: economists

SEOUL, May 5 (Yonhap) -- The South Korean economy will likely undergo a so-called
double-dip slump this year as the effects of worldwide stimulus measures die
down, negatively affecting its exports, economists warned Tuesday.
In the first quarter of this year, the economy barely avoided a recession, or two
straight quarters of contraction, by growing 0.1 percent from three months
earlier. The first-quarter gain compares with a 5.1 percent quarterly plunge for
the October-December period.
"There is the possibility that the economy could sink into a double dip this
year," said Lim Ji-won, a senior economist at JP Morgan Chase & Co. "After
gaining traction in the second quarter, the economy's growth momentum could drop
again."
A double dip refers to a situation where gross domestic product growth slides
back into negative territory after a quarter or two of positive growth.
The prediction is based on the fact that exports, South Korea's main growth
engine, could taper off as the effects of global pump-priming measures and
interest rate cuts begin to wane, Lim said.
Oh Suk-tae, an analyst at Citibank Korea Inc., echoed that view.
"It is true that there is concern over the economy plunging into a double dip,"
he said. "Such fears mirror assessments that the economy won't be able to make an
upturn while the property bubble remains."
Some economists predicted that the Korean economy, Asia's fourth-largest, could
meet with a double dip after the fourth quarter of this year.
"The economy is expected to see its growth momentum decline in the
October-December period or the first quarter of next year," said Ko Yu-seon, an
economist at Daewoo Securities Co. "Quarterly growth is unlikely to top 1
percent, though it many not slip into negative territory."
Others forecast that the economy will escape a double dip but be stuck in a slump
due to growing bad loans at banks, weak corporate investments and sagging
consumer spending.
The Bank of Korea, the country's central bank, predicts the economy will shrink
2.4 percent on-year in 2009, the worst performance in more than a decade, hurt by
plunging exports and anemic domestic demand.
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