ID :
85004
Sun, 10/18/2009 - 10:16
Auther :
Shortlink :
https://www.oananews.org//node/85004
The shortlink copeid
(News Focus) Debate looms over `double dip` for S. Korean economy
(News Focus) Debate looms over 'double dip' for S. Korean economy
By Kim Soo-yeon
SEOUL, Oct. 18 (Yonhap) -- Controversy is brewing over whether the South Korean
economy may lapse into a "double-dip" as the global economic recovery sputters
amid a weak local job market and the waning effects of fiscal stimulus.
Some policymakers and economists contend that the export-driven South Korean
economy may not be able to avoid a double-dip, the condition where an economy
falls into another downturn after a short-lived recovery following a slowdown,
given the protracted slowdown in major advanced economies.
Making matters worse for Asia's fourth-largest economy, the local job market
remains sluggish, making consumers reluctant to open their wallets and creating a
stumbling block to domestic demand, they say.
The Korean economy grew 2.6 percent in the second quarter from three months
earlier, the fastest pace in more than five years, on aggressive fiscal spending
and rate cuts. Hit by the global economic recession, it tumbled 5.1 percent
on-quarter in the fourth quarter of last year before rising 0.1 percent in the
January-March period.
In a recent forum held in Seoul, Nobel Prize-winning economist Paul Krugman
warned that the recent rebound of the Korean economy should not be taken as a
harbinger of sustainable recovery.
Kang Man-soo, a former finance minister, shared a similarly bleak outlook.
"Regardless of whether to unwind emergency measures, it seems to be inevitable
that the Korean economy will face a double-dip downturn," Kang said, adding that
Korea will likely continue to see its economy slump at least for the next two
years.
Such fears come amid mixed signals about the global economic recovery. The
economic slump in the United States is showing signs of easing, but its job
market remains fragile, with the unemployment rate near 10 percent. The expected
waning effects of aggressive fiscal spending around the globe are also adding to
concerns, analysts say.
The issue has been thrown into a more intense spotlight since talk over the
timing of a potential rate hike has heated up. There is some speculation South
Korea may shift into a tightening stance earlier than advanced economies.
The government and the Bank of Korea (BOK), which have disagreed recently over
rate policy, downplayed the possibility that the economy could slip into a
double-dip.
"Next year, South Korea will likely continue its mild recovery phase, and
prospects for a double-dip are not high," Finance Minister Yoon Jeung-hyun told
lawmakers Tuesday.
BOK Gov. Lee Seong-tae cast a similar prediction.
"The Korean economy is not likely to show a 'W-shaped' pattern. It will likely
show a mild recovery," Lee said on Thursday at a parliamentary audit session,
adding that the Korean economy is forecast to contract less than 1 percent this
year, better than the bank's previous estimate of a 1.6 percent decline.
Yoon forecast that the economy would shrink by 1 percent or less this year,
compared with a previous estimate of a 1.5-percent contraction, adding it will
grow 4 percent next year.
Some analysts say South Korea's export-dependent economy will almost certainly be
impacted by any delay in the economic recoveries of advanced countries.
"If the effects of economic stimulus packages fade out and the private sector
cannot make a self-sustaining recovery, the economy will be burdened," said Kwon
Soon-woo, a senior economist at the Samsung Economic Research Institute.
But others argue that while optimism should be balanced by caution, the
possibility of a double-dip is slim given South Korea's sound fundamentals.
"I think that a chance for a double-dip is not high. Even if an unexpected shock
comes, South Korea has the policy tools to combat it," said Lee Sung-kwon, an
economist at Shinhan Investment Corp.
"Korea's key interest rate does not stand at zero, which leaves room for the BOK
to cut it if a severe downturn comes, and the government's fiscal status remains
in relatively better shape than many other countries."
sooyeon@yna.co.kr
(END)
By Kim Soo-yeon
SEOUL, Oct. 18 (Yonhap) -- Controversy is brewing over whether the South Korean
economy may lapse into a "double-dip" as the global economic recovery sputters
amid a weak local job market and the waning effects of fiscal stimulus.
Some policymakers and economists contend that the export-driven South Korean
economy may not be able to avoid a double-dip, the condition where an economy
falls into another downturn after a short-lived recovery following a slowdown,
given the protracted slowdown in major advanced economies.
Making matters worse for Asia's fourth-largest economy, the local job market
remains sluggish, making consumers reluctant to open their wallets and creating a
stumbling block to domestic demand, they say.
The Korean economy grew 2.6 percent in the second quarter from three months
earlier, the fastest pace in more than five years, on aggressive fiscal spending
and rate cuts. Hit by the global economic recession, it tumbled 5.1 percent
on-quarter in the fourth quarter of last year before rising 0.1 percent in the
January-March period.
In a recent forum held in Seoul, Nobel Prize-winning economist Paul Krugman
warned that the recent rebound of the Korean economy should not be taken as a
harbinger of sustainable recovery.
Kang Man-soo, a former finance minister, shared a similarly bleak outlook.
"Regardless of whether to unwind emergency measures, it seems to be inevitable
that the Korean economy will face a double-dip downturn," Kang said, adding that
Korea will likely continue to see its economy slump at least for the next two
years.
Such fears come amid mixed signals about the global economic recovery. The
economic slump in the United States is showing signs of easing, but its job
market remains fragile, with the unemployment rate near 10 percent. The expected
waning effects of aggressive fiscal spending around the globe are also adding to
concerns, analysts say.
The issue has been thrown into a more intense spotlight since talk over the
timing of a potential rate hike has heated up. There is some speculation South
Korea may shift into a tightening stance earlier than advanced economies.
The government and the Bank of Korea (BOK), which have disagreed recently over
rate policy, downplayed the possibility that the economy could slip into a
double-dip.
"Next year, South Korea will likely continue its mild recovery phase, and
prospects for a double-dip are not high," Finance Minister Yoon Jeung-hyun told
lawmakers Tuesday.
BOK Gov. Lee Seong-tae cast a similar prediction.
"The Korean economy is not likely to show a 'W-shaped' pattern. It will likely
show a mild recovery," Lee said on Thursday at a parliamentary audit session,
adding that the Korean economy is forecast to contract less than 1 percent this
year, better than the bank's previous estimate of a 1.6 percent decline.
Yoon forecast that the economy would shrink by 1 percent or less this year,
compared with a previous estimate of a 1.5-percent contraction, adding it will
grow 4 percent next year.
Some analysts say South Korea's export-dependent economy will almost certainly be
impacted by any delay in the economic recoveries of advanced countries.
"If the effects of economic stimulus packages fade out and the private sector
cannot make a self-sustaining recovery, the economy will be burdened," said Kwon
Soon-woo, a senior economist at the Samsung Economic Research Institute.
But others argue that while optimism should be balanced by caution, the
possibility of a double-dip is slim given South Korea's sound fundamentals.
"I think that a chance for a double-dip is not high. Even if an unexpected shock
comes, South Korea has the policy tools to combat it," said Lee Sung-kwon, an
economist at Shinhan Investment Corp.
"Korea's key interest rate does not stand at zero, which leaves room for the BOK
to cut it if a severe downturn comes, and the government's fiscal status remains
in relatively better shape than many other countries."
sooyeon@yna.co.kr
(END)
