ID :
202247
Fri, 08/19/2011 - 07:22
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Shortlink :
https://oananews.org//node/202247
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Global recession fears sound alarm bells in Korean economy
SEOUL, Aug. 19 (Yonhap) -- Fresh concerns over a global recession are setting off alarm bells in the South Korean economy, which is heavily dependent on overseas demand and feared to miss its growth target this year, market experts said Friday.
A report by Morgan Stanley on Thursday warned that global growth was slowing and that the U.S. and Europe were on the brink of plunging into a new recession, two years after the end of the last one.
The global investment bank noted that weekly and monthly economic data released in the U.S. show no improvements in the job market, sinking housing sales and rising inflation. The U.S. economy expanded at less than a 1 percent annual rate in the first half of the year.
The eurozone economy is also losing its growth momentum. The German economy, the locomotive of the European Union (EU) economy, expanded 0.1 percent in the second quarter from the previous quarter, slowing from its 1.3-percent on-quarter gain.
According to data from the commerce ministry, South Korea's trade with the EU and the U.S. accounts for 20 percent of its total exports and imports, which means an economic slowdown in the two economies would hurt the South Korean economy.
"The South Korean economy is facing growing uncertainties, and its growth rate will fall as the global economy is losing steam for growth," said Chung Young-shik, a researcher at the Samsung Economic Research Institute.
The researcher said the Korean economy is expected to growth 4 percent for the year, lower than his earlier projection of 4.3 percent. The South Korean government is expecting the economy to grow 4.5 percent this year.
LG Economic Research Institute also said slowing global trade will lead to a drop in exports of automobiles and electronic goods, South Korea's key export items.
"The possibility of the global economy relapsing into another recession is still valid. In that case, the Korean economy may grow at a less than 4 percent for the year," the institute said.
On Thursday, Morgan Stanley also downgraded its 2011 economic growth forecast for South Korea 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, it said.
"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," it said.
The investment bank said local consumers are overspending, with household expenditures exceeding income growth for eight quarters and credit card usage rising.
Meanwhile, the Bank of Korea 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 downgrade and eurozone debt fears, overshadowed persisting inflation woes.
A report by Morgan Stanley on Thursday warned that global growth was slowing and that the U.S. and Europe were on the brink of plunging into a new recession, two years after the end of the last one.
The global investment bank noted that weekly and monthly economic data released in the U.S. show no improvements in the job market, sinking housing sales and rising inflation. The U.S. economy expanded at less than a 1 percent annual rate in the first half of the year.
The eurozone economy is also losing its growth momentum. The German economy, the locomotive of the European Union (EU) economy, expanded 0.1 percent in the second quarter from the previous quarter, slowing from its 1.3-percent on-quarter gain.
According to data from the commerce ministry, South Korea's trade with the EU and the U.S. accounts for 20 percent of its total exports and imports, which means an economic slowdown in the two economies would hurt the South Korean economy.
"The South Korean economy is facing growing uncertainties, and its growth rate will fall as the global economy is losing steam for growth," said Chung Young-shik, a researcher at the Samsung Economic Research Institute.
The researcher said the Korean economy is expected to growth 4 percent for the year, lower than his earlier projection of 4.3 percent. The South Korean government is expecting the economy to grow 4.5 percent this year.
LG Economic Research Institute also said slowing global trade will lead to a drop in exports of automobiles and electronic goods, South Korea's key export items.
"The possibility of the global economy relapsing into another recession is still valid. In that case, the Korean economy may grow at a less than 4 percent for the year," the institute said.
On Thursday, Morgan Stanley also downgraded its 2011 economic growth forecast for South Korea 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, it said.
"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," it said.
The investment bank said local consumers are overspending, with household expenditures exceeding income growth for eight quarters and credit card usage rising.
Meanwhile, the Bank of Korea 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 downgrade and eurozone debt fears, overshadowed persisting inflation woes.
