Two Scenarios for Korea"s Economy Next Year

The Korean economy will accomplish a 2% growth rate next year if optimistic conditions prevail. The current restructuring for finance and companies will have to be completed successfully and the recent rise in the value of the Japanese yen must continue for positive growth to occur.
Whereas, if the restructuring is impeded and the world economy falls into a recession, the Korean economy will record a minus 1.5% growth rate pessimistically next year.
The Korea Development Institute (KDI), one of the most reliable economic research institutes, forecasted two possible scenarios for next year's economy.
According to the optimistic forecast, KDI predicted that the loan interest rates by the banks will lower to 15% annually by late this year and to 11% by the end of next year. KDI also estimated that the value of the yen against the U,S. dollar will rise from an average of 135 yen for the latter half of this year to an average 110 yen next year.
Accordingly, the growth rate will record a minus 6.4% this year and a plus 2% next year, the KDI predicted.
According to the optimistic scenario, the current account surplus will amount to 37 billion dollars this year and 29 billion dollars next year. Another pessimistic scenario states, that as the loan interest rate by the banks maintain the high level of 13% next year and the value of the yen against the U.S. dollar weakens above 130 to the end of next year, growth rate would be minus 6.6% in 1998 and minus 1.5% in 1999. In this case, the current account surplus would be 38 billion dollars in 1998 and 30.9 billion dollars in 1999.
The unemployment rate, under an optimistic scenario, is forecasted to be 7.2% in 1998 and 8.2% in 1999 while a pessimistic scenario predicts 8.9% in 1999. Therefore, for the time being, the unemployment issue would be the most important, the KDI commented.