Our forecast of economic growth for 2008 is unchanged since last June when the projected growth rate was 4.2%. The export sector has been more robust than previously expected and compensated for the weakening domestic demand.

We project that the Korean economy will grow slightly below 4% in 2009. A slowdown in the export sector due to the global financial crisis and the subsequent decline in the world economy is cited as main reasons for Korea's slow growth next year. However, it is expected that the economy will start to rebound in the second half of 2009 as financial market conditions, both domestic and international, stabilize.

The current account is expected to post $5.8 billion in deficit next year following the deficit of $10 billion (est.) for 2008. Consumer inflation is expected to improve next year from 4.9% in 2008 to 3% range in 2009 as the inflationary pressures dissipate. The won-U.S. dollar exchange rate is expected to remain at a relatively high level for the whole of 2009. However, the Korean won is likely to appreciate slowly against the dollar in the latter half with improvements in credit conditions and the Korea's current account balance.

Meanwhile, a tax cut package in the amount of 11.7 trillion won included in '2008 Tax Revision', announced in September, is expected to increase the economy's growth rate by an additional 0.4%p through increases in private consumption and investment.

The current international financial market crisis is expected to have strong negative ripple effects on the export-dependent Korean economy. As such, a stronger policy priority should be placed on supporting domestic demand through improvements in regulatory environment and job market conditions. Specifically, implementation of expansive monetary and fiscal policies such as cuts in taxes and interest rates, boosting SOC projects outside the capital area, easing land-related regulations in the Seoul area, and enhancing the labor market flexibility are essential.

(아래 표지를 누르시면 원문으로 이동합니다.)