11 institute chiefs foresee recovery start in second half

The Korean economy might start to recover in the second half of the year, said the industry minister and heads of economic institutes yesterday.

At a conference hosted by the Ministry of Trade, Industry and Energy yesterday, heads of 11 private and state-run economic research institutes predicted the local economy would grow by about 2 percent as it starts to revitalize in the latter part of the year.

The Korean economy grew less than 1 percent a quarter for the past seven quarters. Q4 GDP growth last year was 0.3 percent.

The economic institute heads concluded that growth will be steady but slow. “The current slowdown is expected to continue for the time being,” they said.

In the long term, the institutes forecast GDP growth of about 3 percent until 2020, suggesting that the slowdown could remain for some time.

The Bank of Korea made a similar prediction last week as it froze the benchmark interest rate at 2.75 percent for the sixth consecutive month, lowering its projection for economic growth from 2.8 percent to 2.6 percent.

The central bank said the economy would start to recover in the second half of the year. In the first six months, GDP will likely expand 1.8 percent year-on-year, while in the second half it would grow at 3.3 percent.

However, the BOK said the revised outlook did not take into account the proposed supplementary budget because it has not been passed by the National Assembly.

The Ministry of Strategy and Finance cut its projection from 3 percent to 2.3 percent in late March. The ministry plans to propose a supplementary budget of about 17 trillion won ($15.2 billion) this week.

Hyun Oh-seok, deputy prime minister for economy and finance minister, reiterated several times that a supplementary budget will help push the growth forecast up to 3 percent.

The won’s value against the U.S. dollar is expected to stay between 1,070 and 1,080, they forecast.

Last year, the average value of the won stood at 1,127 against the dollar.

The institute heads said the government should track the rate of the Japanese yen and prepare measures against the low yen persisting for a long period of time.

They projected the international oil price would be around $105 per barrel due to increases in production of non-OPEC (Organization of the Petroleum Exporting Countries) members.

“Research institutes have an important role in encouraging businesses to make investments despite uncertainties,” said Industry Minister Yoon Sang-jik. “It would be desirable to see them keep studying changing industrial trends and discovering new growth engines for the country.”

By Song Su-hyun [ssh@joongang.co.kr]