Not As Strong
Economic institutions taking turns to lower growth projections for next year
Worries over the country's economic growth for next year are spreading with foreign economic institutions lowering their earlier economic growth projections one after another. Finance and Economy Minister Kwon O-kyu also warned that the economic growth next year won't be as high as this year by coming to just over 4 percent.
What touched off the concern was the projections that exports won't be as great as this year due to slower growth of the economies of major trading countries such as the U.S. and China, which will also lead to slowdown in domestic spending.
Deputy Prime Minister Kwon, in his speech at the Hankyung Millennium Forum, Aug. 28 said the trading conditions would be improved over this year next year so that the public will be able to physically feel the difference, but the economic growth would be in the middle of 4 percentage points, worse than this year.
Major economic research institutions estimate that Korea's potential growth rate would be around 4.8 percent next year and projections are that the economic growth would not be able to surpass the potential growth rate.
Citigroup, for example, lowered its initial growth projection for Korea from 4.7 percent to 4.3 percent for next year and other international institutions including the IMF projects 4.5 percent growth, Deutsche Bank 4 percent, and Mitsubishi 4 percent in the range of from 4 percent to 4.5 percent.
These negative projections on the Korean economy are related to estimates that the world economy will be sluggish next year.
Hyundai Economic Research Institute said exports and consumer spending for next year would fall from this year with the U.S. economy showing signs of slowing down, which would lead to slower growth of the Korean economy, in light of its heavy dependence on foreign trade.
The U.S. economy is expected to slow down due to high oil prices and sluggish real estate market. UBS Merrill Lynch and Goldman Sachs and other investment banks projected the U.S. economy would grow 2.5 percent next year from around 3 percent this year. China, which has been a growth engine for the world economy, is expected to slow down its economic growth by raising interest rates to reign in its overheated economy. Asia Development Bank said China's economic growth next year will dip to 8.8 percent from 9.5 percent this year.
Japan and the EU have been seeing their economies growing continuously, but their economic indicators peaked in February and May. Consequently, Korea's economy would face an impact from the slowdown of those economies in the sectors of trade and domestic consumption with the possibility for the growth of exports dropping to one-digit increase. nw