Economists warn of possible 'double-dip' downturn for S. Korea

SEOUL, Sept. 23 (Yonhap) -- Recent indicators showing a recovery in the South
Korean economy were misguided by hefty fiscal spending and record-low interest
rates, economists warned Wednesday, saying the economy could face a possible
"double-dip" downturn.
In a survey of 21 economists from both state and private economic research
institutes, conducted by the Federation of Korean Industries, 66.7 percent
predicted that the economy may sink into a downturn after only a short-term
rebound.
"The economists surveyed said recent signs of an economic recovery were an
optical illusion, fueled by fiscal expenditure, abundant liquidity and low
interest rates," the federation said in a statement.
The economists also viewed mounting household debts as a major threat to a robust
recovery for the local economy.
The survey predicted the South Korean economy to contract 0.7 percent this year
and expand 3.8 percent next year, roughly in line with the government's
forecasts.
Hit by the global economic crisis, South Korea's export-oriented economy has been
grappling with its worst downturn in a decade.
But there were growing signs the economy is back on a growth track. In the
April-June period, the economy grew 2.3 percent, compared with a 0.1 percent
expansion the prior quarter and a 5.1 percent shrinkage in the final quarter of
last year.
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