Growth estimate boosted to 5.2%

The Bank of Korea raised its estimate for Korea’s 2010 economic growth from 4.6 percent to 5.2 percent, citing rising demand from overseas markets, revived consumer spending and corporate infrastructure investments at home.

The central bank said consumer spending, buoyed by rising corporate profit that translate into bigger paychecks for employees, would rise 4 percent throughout this year, up from last year’s 0.2 percent, while corporate infrastructure investment would expand 13.4 percent, up from minus 9.1 percent last year. The BOK also indicated the private sector would play a far bigger role in the recovery this year as the impact of the massive state stimulus that helped bolster the economy last year is waning.

According to the Bank of Korea yesterday, gross domestic product, which inched up 0.2 percent in 2009, would expand by 5.2 percent this year, larger than the 4.6 percent it forecast last December, and also the biggest annual growth since 2006. The bank also said about 24,000 new jobs will be created this year, mostly in the private sector. The number is higher than 17,000 estimated in last December’s forecast but still lower than the pre-crisis days of 2001 to 2007 when an average of 325,000 new jobs were created every year.

The central bank cited increasing demand from the overseas markets, on the back of an improved global economy, rising corporate profits at home, and a succession of upbeat developments in global tech markets, including the smartphone craze and demand for more semiconductors from emerging markets. The bank, which estimated last December the global economy would expand by 3.3 percent in 2010, revised the number to 3.5 percent, citing the latest forecasts from the International Monetary Fund and the Organization for Economic Cooperation and Development.

“Local households’ incomes are expected to rise considerably due to the economic recovery and increased corporate earnings,” the central bank said in a statement. According to the statement, at workplaces where management and labor unions have agreed on this year’s pay increase, the agreed-upon increase was 3.7 percent, bigger than last year’s 1.7 percent.

“The job situation will improve as well. But the recent recovery does not seem to be able to create as many jobs as before, while more and more young people who were previously students enter the job market,” it said. Indeed, the bank also lifted its estimated jobless rate for 2010 to 3.7 percent, up from the 3.6 percent it predicted last December. Korea’s overall jobless rate for 2009 was 3.6 percent.

By Jung Ha-won [hawon@joongang.co.kr]