Published : Nov. 23, 2011 - 16:47
Major think tanks and investment banks slashed the 2012 growth forecast for the Korean economy to an average of 3.7 percent, tracking downward revisions emerging as exports cool due to growing external uncertainty in advanced nations.
The growth forecasts by 19 think tanks, brokerage firms and banks came in mostly in the 3 percent range, predicting the country will grow below its potential growth rate of 4 percent for the second straight year.
The grimmer outlook follows downward adjustments made by the state-run Korea Development Institute Sunday from 4.3 percent to 3.8 percent. Moody’s Investors Service earlier this month scaled down its Korea projection for next year to 3.5-4.0 percent, compared with its earlier estimate of 4.5 percent.
The economy expanded 0.7 percent on-quarter in the third quarter, posting slower than the revised on-quarter growth of 0.9 percent tallied in the three previous months, the Bank of Korea said.
“It would be inevitable for the Korean economy to be determined again by external factors next year. Even the economies of advanced nations including the U.S. cannot be immune to the eurozone problems,” Kwon Soon-woo, an economist at Samsung Economic Research Institute, said.
SERI and LG Economic Research Institute predicted 3.6 percent growth for next year.
HMC Investment & Securities offered the most optimistic bet among local brokerages at 4.2 percent.
“Economic momentum will slow as demand contracts in Europe and the U.S., but fundamentals will stay strong here,” Yoo Shin-ik, an economist at HMC said.
Views were mixed at foreign investment banks. While Swiss banking giant UBS stayed bleak with a 2.8 percent growth outlook for Korea next year, Nomura Securities was upbeat with a 5.8 percent projection. Views at Goldman Sachs, BNP Paribas, Barclays and Morgan Stanley stayed in the 3-percent range.
The average figure from 19 institutions sits 0.8 percent lower than the projection of 4.5 percent made by the government.
The Finance Ministry, however, is widely expected to follow suit in its economic outlook update due in early December.
Finance Minister Bahk Jae-wan in October said Seoul would maintain its current forecast for now, but later hinted at a possible cut by saying that his team “will factor in the cut made by the Korea Development Institute” earlier this week.
The International Monetary Fund in September raised its 2012 growth forecast for Korea to 4.4 percent from 4.2 percent. However, it slashed its 2011 forecast to 3.9 percent from 4.5 percent, citing growing signs of a global slowdown and sluggish domestic consumption.
By Cynthia J. Kim (
cynthiak@heraldcorp.com)