Korean Economic Growth for 2nd Half Projected at 4.6%, Down from 7.6% in 1st Half

Korean economic growth is expected to slow from 7.6% in the first half of this year to 4.6% in the second half. The major factors in the slowdown are a set-back of the recovery trend in the global economy following financial instability in Europe, the recent decline of economic indicators in China and the United States, normalization of domestic macroeconomic policy, and base effects from the growth trend of last year, which was high in the first and low in the second half.

In the second half, private consumption is expected to grow 3%, with interest rate hikes, decline of real estate business conditions and employment growth slowdown. Facility investment, which posted strong 29% growth in the first half, may slacken to the 12% level in the second half, affected by stagnation of economic recovery trends in major countries, domestic interest rate hikes, full-fledged implementation of corporate restructuring, and other factors. Meanwhile, sluggishness of construction investment is likely to deepen further in the second half.

Current Account Surplus May Decline to US$8.4 Bil. in 2nd Half from US$11.6 Bil. in 1st Half

Influenced by a decrease in total demand following the financial instability in advanced countries, economic slowdown in China, the appreciation of Korea's currency against the U.S. dollar and base effects, export growth (U.S. dollar basis) is expected to slow to 16.5% in the second half from 33.5% in the first half. The scale of the current account surplus also is expected to decline to US$8.4 billion in the second half from US$11.6 billion in the first half due to faster growth in imports than exports, expansion of overseas service demand, etc.

Consumer Prices to Grow 3.2% and Won/USD Fx-Rate to Appreciate to 1,130 Won in 2nd Half

In the second half, consumer prices may increase due to stronger total demand, public utility rate hikes, and base effects. With the won currency also showing an appreciation trend in addition to relatively stable prices of import raw materials, including crude oil, consumer price growth is expected to remain below 3.5%. Affected by easing of the financial crisis in Europe and the U.S. economic slowdown, etc., the U.S. dollar-based foreign exchange rate is expected to appreciate gradually and attain the 1,130-won level on average in the second half.

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