S. Korea's Q2 growth forecast to be sharper than expected: analysts

By Kim Soo-yeon
SEOUL, June 9 (Yonhap) -- South Korea's quarterly economic growth is likely to be
sharper than expected for the second quarter, but a full-blown recovery may be
possible only from next year, economists said Tuesday.
Experts predicted that the Korean economy may grow between 0.5 and 2 percent
on-quarter in the April-June period amid stabilizing global financial markets.
The growth forecasts compared with a 0.1 percent expansion posted in the first
quarter. Asia's fourth-largest economy shrank 5.1 percent in the final quarter of
2008, buffeted by tumbling exports and sluggish domestic demand.
"The global financial markets are stabilizing and inventories considerably fell,"
said Oh Moon-suk, a senior economist at LG Economic Research Institute. "In the
second quarter, the Korean economy is projected to grow faster than expected."
A set of economic indicators are reinforcing optimism that the Korean economy may
have bottomed out.
In April, the country's industrial output grew 2.6 percent on-month, maintaining
its month-on-month expansion for the fourth straight month. Business and consumer
sentiment has climbed on hopes of an economic recovery.
Inventories fell 2.8 percent on-month in April, the sixth consecutive monthly
fall, signaling that South Korea's inventory adjustment may be close to an end.
Despite some signs of improvements, experts predicted that it would take
considerable time for the Korean economy to recover. Some also did not rule out a
possibility of the so-called double-dip downturn, which means the momentum of the
local economy may fall in the third quarter following a mild recovery.
Citing lackluster data on the real economy, the government and the Bank of Korea
have said that it is premature to say that the local economy is bottoming out and
that the country will likely recover very slowly.
"In the third quarter, growth momentum may wane as the strength of aggressive
pump-priming might decline and oil prices will likely rise," said Lim Ji-won, an
economist at JPMorgan Chase & Co. "South Korea is likely to see a "U-shaped"
recovery down the road."
Since the start of this year, oil prices, which had tumbled amid slumping demand
hit by the global recession, nearly doubled to about $70 per barrel last week.
South Korea is the world's fifth-largest oil importer.
They said South Korea may post a full-fledged economic recovery only after next
year and the job market will likely remain sluggish for the considerable period
of time.
"The country's unemployment rates will likely fall in the second half, compared
with the first half, but it is not clear whether the job market would improve
even next year," said Kwon Soon-woo, a senior economist at the Samsung Economic
Research Institute.
sooyeon@yna.co.kr
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