South Korea's Growth Is Likely to Slow More [wsj]
By JUNG-AH LEE
April 28, 2008; Page A14
SEOUL, South Korea -- South Korea's economy, after experiencing its weakest quarterly growth in more than three years, is likely to slow even more in the next few months.
Stumbling investments and slowing exports led its gross domestic product to expand 0.7% on a seasonally adjusted basis in the first quarter, the Bank of Korea said in preliminary data issued Friday. That fell shy of a market estimate for a 1% rise and was the weakest quarterly growth since the fourth quarter of 2004.
Following the data's release, a director-general at the central bank's Economic Statistics Department, Choi Chun-sin, said the economy may grow at a slower rate in the April-June period. That might lead the central bank to cut its key interest rate as early as May, despite rising inflation, observers say.
"The Korean economy appears more exposed to the global slowdown than previous assumed, with autonomous domestic demand growth unlikely to offset the expected weakness in exports," said HSBC economist Frederic Neumann.
He expects the central bank to deliver its first cut of the year in its benchmark interest rate by a quarter-percentage point at the end of this quarter, instead of the middle of the third quarter as he had previously assumed.
The central bank, which has left its benchmark interest rate unchanged at 5% since August, will next review its monetary policy on May 8.
The GDP report added to evidence that South Korea's new president, Lee Myung-bak, will have a difficult time meeting his short-term economic goals. Mr. Lee, who campaigned on giving South Korea an economic jolt, has had to adjust in the face of the U.S.-led global economic slowdown.
Finance Minister Kang Man-soo said on Thursday that it will be difficult to hit Mr. Lee's goal of achieving 7% economic growth over his five-year term.
In his report on Friday, the Bank of Korea's Mr. Choi said the quarterly growth in the second half may outperform the first-quarter's reading, as capital and construction investments improve. |
