Think tanks project 2%-range growth for this year on falling exports, consumption


The government is weighing a number of plans including more investment and deregulation to jumpstart the economy as Korea’s growth is expected to slow to below 3 percent this year.

Instead of a supplementary budget which it has been negative about, Seoul is set to announce deregulation measures on Monday and an additional state investment of several trillions of won around mid-September.

The government is pulling together finances to add on to the 8.5 trillion won ($7.5 billion) investment plan laid out in June for the second half.

Hoping to vitalize the economy, it is pushing to ease or suspend certain regulations including those on corporate activity, startup ventures, investment, location and expansion of factories for up to a year.

Seoul had suspended or scrapped about 280 regulations in July 2009 amid the global financial crisis.

“Macroscopically, we plan to increase state investment, and microscopically, take deregulatory measures,” a Finance Ministry official said.

“They are small steps, but will have immediate effects in improving economic sentiment and revitalizing the private sector.”

Private think tanks have cut their growth outlooks for the country to the 2-percent range as the eurozone fiscal crisis takes a toll on economies around the world.

The Korea Economic Research Institute lowered its gross domestic product forecast for this year to 2.6 percent, down from 3.2 percent, last month.

Hyundai Research Institute shaved 0.7 percentage points off its previous projection to 2.8 percent.

Foreign investment banks including Nomura Securities and JPMorgan already revised each of theirs to 2.9 percent in late July.

The cutbacks came as Korea’s exports and domestic consumption sagged.

Exports, the driving engine of the Korean economy, in the first eight months of this year dropped 1.5 percent from a year ago. Exports in January-August last year had surged 23.5 percent on-year.

The Retail Sales Index reported by Statistics Korea gained 3.4 percent in July from a month ago, but has been low for months, with -2.6 percent in March, 0.9 percent in April, 0.7 percent in May and -0.5 percent in June.

The state-funded Korea Development Institute is set to announce a rare revision of its growth outlook around mid-September. The KDI’s figure is expected to be lowered from the current 3.6 percent down to the 2-percent range.

The government is keeping its projection in the 3-percent range, but has begun to ruminate pulling down its forecast for next year.

The Finance Ministry is set to present a revised growth outlook when it lays out next year’s budget plans at the end of this month.

By Kim So-hyun (sophie@heraldcorp.com)