South Korea Reverses Economic Growth Prediction

By Kurt Achin

Seoul
10 February 2009

South Korea has a new finance minister - and a newly gloomy economic outlook. The government is reversing a recent prediction of growth, saying the South Korean economy will contract for the first time since the Asian financial crisis of the late 1990's.

South Korean Finance Minister Yoon Jeung-hyun was sworn in Tuesday and proceeded to share what he describes as "unpleasant" but "honest" news.

He says South Korea's economy is contracting more quickly than expected, as the world economy gets worse. He says the economy is expected to contract two percent this year, because of falling domestic demand and exports.

Yoon estimates the South Korean economy will shed about 200,000 jobs. The forecast belies a government prediction from December that the economy would grow this year by a modest three percent.

The South Korean announcement comes as members of the United States Senate wrangle over a possible deal to spend about $800 billion to stimulate the collapsing American economy.

China and Japan are spending hundreds of billions of dollars to jump start their own economies and Yoon says Seoul is likely to prime the economic pump, as well.

He says South Korea will place highest priority on activating domestic demand and will issue a supplementary budget as early as possible.

Officials sat that budget is likely to contain at least $2 billion in public spending.  South Korean central bank leaders are scheduled to meet this week and are expected to cut interest rates to record low levels, to attempt to get the economy moving.