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Economy to bottom out in Q1: Bahk

Jan. 30, 2012 - 16:55 By Korea Herald
Economic growth is likely to be the weakest in the first three months of this year as external uncertainties will peak in the period, Finance Minister Bahk Jae-wan said Monday.

“Growth uncertainties are seen to be significant in the first quarter. The risk from the European debt crisis is likely to ease in the second and third quarters,” Bahk told reporters at a news conference.

Bahk’s projection comes amid signs of faltering growth. The economy grew 0.4 percent, the least in two years in the October-December period on reduced exports due to tepid demand from Europe and other advanced countries, according to the Bank of Korea. Exports trimmed 1.5 percent in the fourth quarter compared to the three months earlier, dropping for the first time in two years. Corporate investment and consumption also declined.

His concerns included the upward price pressure on oil prices, weak domestic consumption and the high level of household debt.

Bahk added that the ministry is ready to take “strong” measures to cope with risks stemming from the euro zone debt crisis, inflationary pressure and other unexpected shocks on the way. He said the ministry plans to make a framework to manage foreign capital bank’s investment in the local bond market, one that measures timing and size of the investments.

“The government will take strong measures in response to the domestic and external risks such as the European financial crisis, unease in prices of raw materials, and parliamentary and presidential elections,” he said.

Bahk assessed the country’s household debt burden started to ease after policy measures tightened its growth.

“Household debt is one of the most difficult problems facing the economy. But a considerable effect has been noted since the government adopted soft-landing measures last year,” Bahk said.

Debt owed by households to depository corporations such as banks and non-bank institutions stood at 634.3 trillion won as of October. Each carries debt of about 1.6 times their annual disposable income on average.

By Cynthia J. Kim (cynthiak@heraldcorp.com)