ID :
202084
Thu, 08/18/2011 - 11:08
Auther :
Shortlink :
https://oananews.org//node/202084
The shortlink copeid
Morgan Stanley cuts S. Korea growth forecast
SEOUL, Aug. 18 (Yonhap) -- Global investment banking giant Morgan Stanley downgraded its 2011 economic growth forecast for South Korea on Thursday, citing external shocks and worsening domestic conditions.
South Korea's gross domestic product (GDP) is expected to grow 3.8 percent this year, down from an earlier estimate of 4.5 percent, Morgan Staley said. The revised estimate is below the South Korean government's target of 4 percent.
The investment bank also lowered its 2012 growth projection for the South Korean economy, Asia's fourth-largest, to 3.6 percent from an earlier 4 percent forecast.
"Along with our global GDP forecast downgrades, we are cutting our projections of Korean GDP," Sharon Lam, an economist at Morgan Stanley, said in a report.
"Now with possible external shocks, an adjustment is even more warranted. Income and capex growth will deteriorate, which will lead to slower employment. Asset price volatility is also likely to become more marked," the economist said.
Lam said local consumers are overspending, with household expenditure exceeding income growth for eight quarters and credit card usage rising.
However, she said that South Korea is likely to stay defensive against the ongoing external uncertainties thanks to its strong export competitiveness and healthy financial system, adding concerns on foreign exchange funding are unnecessary.
"The reliance on foreign currency funding is declining to a comfortable level of less than 10 percent for the top commercial banks in Korea," Lam said. "Even if there were capital flight caused by the intensified external uncertainties, we think Korea has enough reserves to weather it peacefully."
South Korea's foreign reserves reached a fresh high of US$311.03 billion as of the end of July, up $6.55 billion from June, and its short-term external debt stood at $146.7 billion in March, after peaking at $190 billion in 2008.
Meanwhile, Morgan Stanley projected the Bank of Korea (BOK) would keep interest rates unchanged through the end of 2012, but added one rate hike may be possible in August or September if the ongoing financial rout calms down.
The BOK froze the key interest rate for the second straight month at 3.25 percent in July as a grim global economic outlook, sparked by the first-ever U.S. rating cut and eurozone debt fears, overshadowed persisting inflation woes.
South Korea's gross domestic product (GDP) is expected to grow 3.8 percent this year, down from an earlier estimate of 4.5 percent, Morgan Staley said. The revised estimate is below the South Korean government's target of 4 percent.
The investment bank also lowered its 2012 growth projection for the South Korean economy, Asia's fourth-largest, to 3.6 percent from an earlier 4 percent forecast.
"Along with our global GDP forecast downgrades, we are cutting our projections of Korean GDP," Sharon Lam, an economist at Morgan Stanley, said in a report.
"Now with possible external shocks, an adjustment is even more warranted. Income and capex growth will deteriorate, which will lead to slower employment. Asset price volatility is also likely to become more marked," the economist said.
Lam said local consumers are overspending, with household expenditure exceeding income growth for eight quarters and credit card usage rising.
However, she said that South Korea is likely to stay defensive against the ongoing external uncertainties thanks to its strong export competitiveness and healthy financial system, adding concerns on foreign exchange funding are unnecessary.
"The reliance on foreign currency funding is declining to a comfortable level of less than 10 percent for the top commercial banks in Korea," Lam said. "Even if there were capital flight caused by the intensified external uncertainties, we think Korea has enough reserves to weather it peacefully."
South Korea's foreign reserves reached a fresh high of US$311.03 billion as of the end of July, up $6.55 billion from June, and its short-term external debt stood at $146.7 billion in March, after peaking at $190 billion in 2008.
Meanwhile, Morgan Stanley projected the Bank of Korea (BOK) would keep interest rates unchanged through the end of 2012, but added one rate hike may be possible in August or September if the ongoing financial rout calms down.
The BOK froze the key interest rate for the second straight month at 3.25 percent in July as a grim global economic outlook, sparked by the first-ever U.S. rating cut and eurozone debt fears, overshadowed persisting inflation woes.
