S. Korea's growth in 2010 will outdo IMF estimate: Roubini

By Kim Young-gyo
SEOUL, May 27 (Yonhap) -- Internationally renowned economist Nouriel Roubini said
Wednesday that South Korea's economic growth next year would fall below the
government's projection but would be higher than the International Monetary
Fund's estimate.

Roubini, who earned the moniker "Dr. Doom" after forecasting the financial
turmoil that began hitting the world economy last year, made the remark at the
sixth Seoul Digital Forum held this week.
"I believe the growth rate (for South Korea in 2010) is going to be less than the
potential (growth rate) of 4 percent, but next year the growth in Korea might be
somehow above the 1.5 percent (estimate) that the IMF has made," he said in a
press conference held at the forum.
A country's potential growth rate refers to a theoretical growth potential that
is possible when a country is operating on full employment and without inflation.

Amid the global recession the South Korean government has set its potential
growth rate at 4 percent. In April, however, the IMF downgraded its 2010 growth
forecast for the Korean economy to 1.5 percent from an earlier prediction of 4.2
percent.
Roubini's outlook for South Korea's economic growth was relatively optimistic
when compared to advanced economies, including the United States, Europe and
Japan.
"That's based on the fact that while Korea's contraction in the fourth quarter
was extremely severe ... the data that came out in the first quarter was
definitely much better with a slightly smaller positive growth," said the New
York University professor, who became widely known for warning as early as
September 2006 that the U.S. economy will face a deep recession.
"Even if this positive growth were driven by a significant amount of fiscal
stimulus that is still continuing, the latest economic indicators suggest it
could be the beginning of a recovery. The growth might already be positive in the
second quarter of this year," he said.
Roubini remained cautious, however, saying that one of the key elements for South
Korea's recovery will depend on how fast the world economy, especially in the
U.S. and China, will recover.
"I agree with the IMF that South Korea's growth rate next year will be below the
potential rate. Whether it will be sub-potential at around 1.7 percent as the
IMF's outlook predicts or slightly more than that will depend on the global
outlook and on domestic policies, although I think monetary easing in South Korea
has been appropriate," he said.
Explaining the thinking behind his positive assessment, Roubini added that what
made South Korea competitive was its economic openness.
"Basic macro financial policies and fundamentals of Korea are sound. I think
Korea is a success story of an economy. It has been open to trade for a long time
and open to globalization," he said.
Although admitting that countries with an open economy could be more easily
affected by external factors, Roubini emphasized that there is no alternative to
globalization for countries even during a global economic downturn.
"If you stay open and global, you might get hurt by shocks. But that happens once
in ten years or twenty years. Ninety percent of time that openness ... in the
economy keeps you very productive, efficient and competitive," he said. "You
(Korea) stay competitive when you are open. South Korea's trade is very dynamic
and competitive."
"If there are appropriate frameworks and strong fundamentals, if there is room
for monetary and fiscal easing (at a time of recession), that (global) shock can
be absorbed."
ygkim@yna.co.kr
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