S. Korean firms' capital spending dips 20 pct in first half

SEOUL, Aug. 4 (Yonhap) -- Capital spending by South Korean companies plunged 20
percent in the first half on reluctance to make new investments amid an ongoing
economic slump, data compiled by the central bank showed on Tuesday.
Local companies' spending on new plants, facility upgrade and maintenance reached
37.7 trillion won (US$31 billion) in the January-June period, compared with 47.27
trillion won a year earlier, according to the Bank of Korea.
The 20.2-percent drop marks the sharpest decline since a 45-percent plunge in
1998 when the financial crisis crippled the Asia's fourth-largest economy.
"Companies remained unwilling to invest due to lingering chances of a repeat of a
credit crunch," said Kim Hyun-wook, an analyst at the state-run Korea Development
Institute (KDI). "They were also concerned about economic uncertainty."
The central bank forecast earlier that corporate capital spending may contract
15.1 percent this year.
Analysts predicted the sluggish investment may continue into the next few years,
hampering the South Korean economy's growth potential.
"Capital spending may return to its normal level only two year later as it tends
to recover at a slower pace than economic growth," said Hwang In-sung, an analyst
at Samsung Economic Research Institute.
The South Korean economy is estimated to have shrunk 3.4 percent in the first six
months of the year from a year earlier.
pbr@yna.co.kr
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