S. Korea's economy to shrink 2.3 pct this year: KDI

SEOUL, May 14 (Yonhap) -- South Korea's economy will shrink 2.3 percent this
year, a state-run think tank said Thursday, sharply lowering its growth outlook
due to a protracted global slowdown.
The growth projection by the Korea Development Institute (KDI) compares with a
0.7 percent advance predicted in its January report. The figure is in line with
the central bank's forecast of a 2.4 percent decline and the government's outlook
of minus 2 percent.
"The United States, Europe and other advanced nations will continue to face a
recession in 2009 in the wake of the financial turmoil," the think tank said in a
statement. "Economic growth in developing countries will also be sharply slowing
down, driving down global growth to minus 1 percent."
KDI predicted that gross domestic product, which shrank 4.3 percent on-year in
the first quarter, will continue to fall 4.1 percent and 3.4 percent in the
second and third quarter, respectively. But growth will turn around by expanding
2.7 percent in the final quarter.
The latest growth outlook comes as expectations are growing that the Korean
economy, Asia's fourth-largest, may be gaining momentum for a turnaround from
what threatened to be the worst downturn in more than a decade.
Industrial output is rebounding and the decline in exports is easing, according
to recent government data. Stock and currency markets are also rising after
suffering sharp fluctuations last year.
According to the central bank, the nation's economy managed to avert a technical
recession with its gross domestic product rising 0.1 percent in the first quarter
from three months earlier, after falling 5.1 percent in the last quarter of 2008.
Opinions are still divided over whether the economy has bottomed out and how long
it will take to see a full recovery.
In April, the International Monetary Fund retained its earlier outlook for South
Korea's economy at minus 4 percent this year but sharply slashed its projection
for 2010 to plus 1.5 percent from plus 4.2 percent, raising fears that South
Korea should wait further to see a meaningful recovery.
KDI, however, predicted that the economy will advance 3.7 percent next year,
nearing the nation's growth potential, as global economy will likely recover at a
"steady" pace.
Private-sector consumption will remain sluggish, the institute said. Consumption
will shrink 2 percent this year before jumping 3.6 percent next year.
Exports will decline 8.8 percent in 2009, though overseas shipments are expected
to rebound from the fourth quarter. For 2010, exports were forecast to jump 6
percent, according to the think tank.
South Korea are expected to post a current account surplus of US$20.8 billion
this year in a turnaround from the previous year's deficit of $6.4 billion.
Unemployment will average an of 3.8 percent from 3.2 percent a year ago, boding
ill for the already frozen labor market that has been hit by the global economic
recession and ongoing corporate restructuring.
Consumer prices were forecast at 2.8 percent this year compared with 4.6 percent
a year ago, according to the think tank.
kokobj@yna.co.kr
(END)