BOK raises S. Korea's 2009 growth outlook

By Kim Soo-yeon
SEOUL, July 10 (Yonhap) -- South Korea's central bank said Friday the local
economy is expected to shrink 1.6 percent this year, better than its earlier
estimate of a 2.4 percent fall, thanks to a set of stimulus packages and rate
cuts.

In a revised economic outlook, the Bank of Korea (BOK) upgraded its economic
forecast to a 0.2 percent expansion in the second half from a year earlier, a
turnaround from an earlier forecast of a 0.6 percent on-year fall.
In the second quarter, the nation's gross domestic product (GDP) is estimated to
have grown 2.3 percent from three months earlier, sharply up from a 0.1 percent
on-quarter expansion in the January-March period, pointing to the resilience of
the economy.
"In the second half, the economy is forecast to post positive growth from a year
earlier on a pickup in economic activity," the BOK said in a statement.
The projection followed a recent upward forecast by the finance ministry. The
government predicted that GDP, the broadest measure of economic performance, will
shrink 1.5 percent in 2009, better than a 2 percent decline it predicted earlier.
But the 2009 forecast still marks the worst performance since a 6.9 percent
contraction in 1998 when the country was in the midst of the Asian financial
crisis. The Korean economy grew 2.2 percent last year.
The government and the BOK have been scrambling to cushion the impact of the
global recession on the Korean economy by unveiling a string of pump-priming
measures and cutting the key interest rate.
The revised outlook came one day after the BOK froze the rate at a record low of
2 percent for the fifth straight month, after cutting it by a total of 3.25
percentage points between October and February.
BOK Gov. Lee Seong-tae said the Korean economy has emerged from the downturn but
that the bank will maintain its accommodative monetary policy for the time being,
as the economic outlook still remains uncertain.
Asia's fourth-largest economy averted a technical recession in the first quarter
by expanding 0.1 percent on-quarter after tumbling 5.1 percent in the fourth
quarter.
Exports, which account for about 60 percent of GDP, are now expected to decline
2.8 percent in 2009, less than a previous prediction of a 9.9 percent fall.
Private spending, one of the economy's main growth engines, will likely shed 1.4
percent this year, the BOK said, compared with an earlier estimate of a 2.6
percent decline.
Facility investment is expected to tumble 15.1 percent this year, less than a 18
percent contraction predicted in April. Construction investment will likely gain
2.2 percent, compared with an earlier estimate of a 1.8 percent advance.
Meanwhile, the BOK expected the country's inflation to rise 2.9 percent in 2009,
up from its earlier estimate of 2.7 percent. The BOK aims to keep annual
inflation between 2.5 percent and 3.5 percent until 2009.
The bank also said Korea is forecast to post a current account surplus of around
$29 billion this year, up from a previous estimate of $18 billion. The government
predicted that the surplus will likely reach around $25 billion.
Experts say that although signs of an economic recovery are rising, it is too
early for the central bank to shift its monetary policy to a tightening stance in
near term, given persisting economic uncertainty.
The government has reiterated that it will stick to its "expansionary" economic
policy, as it is premature to say that the economy is making a full-blown
recovery.
sooyeon@yna.co.kr
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