South Korea economy forecast to grow 4.5% next year

10 December 2010 06:02  [Source: ICIS news]

SINGAPORE (ICIS)--The South Korean economy is expected to post a 4.5% growth next year, with the momentum of expansion likely strengthening in the second half, the country’s central bank said on Friday.

The 2011 GDP growth forecast represented a slowing down from the estimated growth for the current year at 6.1%, which was largely due to a very low-base in 2009 when economic activities slumped, the Bank of Korea (BoK) said in a statement.

“These economic forecasts for 2011 are attended by a considerable degree of uncertainty,” the central bank said, citing heightened geopolitical risks with North Korea and continued fragility in the recovery of western economies.

Based on forecasts, the South Korean economy would expand 3.8% in the first half, with a stronger growth of 5.0% seen in the second half.

This growth trend was based on expectations that fiscal stimulus measures would be withdrawn in the first half, and was predicated on the economic recovery in advanced western countries, including the US, gaining traction from June onwards, the central bank said.

“In terms of expenditure sectors, domestic demand and exports are likely to act as twin sources of growth owing to the strengthening of private consumption and facilities investment,” it added.

Consumer prices would likely continue to increase next year, with average inflation projected at 3.5%, the BoK said.

Meanwhile, strong exports would keep the country’s current account (CA) surplus strong in 2011 at below 2% of GDP.

CA is a measure of an economy’s transactions in goods, services and transfers involving foreign exchange with the rest of the world.

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