South Korea says may cut 2009 growth forecast
Reuters - 2 hours 12 minutes ago
By Seo Eun-kyung and Cheon Jong-woo
SEOUL, Dec 2 - South Korea said on Tuesday it may need to lower its 4 percent economic growth forecast for next year amid a global recession, stoking fresh speculation for an aggressive interest rate cut by the central bank next week.
A central bank official also said Asia's fourth-largest economy would grow by less than 3 percent in the fourth quarter from a year ago, for the first time since the first three months of 2005, while the Bank of Korea revised down third quarter gross domestic product figures.
"We need to think about growth in line with external factors...Given recent factors, it will be difficult to achieve four percent," Deputy Finance Minister Noh Dae-lae said in an interview with a local radio.
In November, Finance Minister Kang Man-soo said growth in 2009 would be able to reach 4 percent aided by various government stimulus packages.
But the projection is too optimistic, analysts and international bodies say. Last month, the International Monetary Fund slashed its 2009 economic growth forecast for South Korea to 2.0 percent from 3.5 percent.
The deputy minister's remark bolstered hopes again that the Bank of Korea would cut interest rates next week and continue cutting. Analysts said a 41-tick spike up in December Treasury bond futures by 0137 GMT was evidence of rate expecations.
"With signs of easing inflation, the central bank will likely move actively, bringing the rates down to 3 percent until the first quarter. In December, we project a 25-basis-point cut for now," said James Lee, an analyst at JPMorgan Chase said.
The Bank of Korea has lowered its benchmark rates by 125 basis points to 4.00 percent in a series of unprecedented moves since October aiming to pull up a deepening downturn.
JPMorgan projected the economy would lose much of its growth pace next year, with the growth rate seen slipping to 1.5 percent from its forecast of 4.1 percent this year.
MORE DOWNTURN The worst global economic downturn in decades is likely to keep denting the export-driven country, making meeting the Bank of Korea's 4.4 percent growth projection for 2008 look unlikely.
"To achieve the 4.4 percent growth projected last summer, the economy should grow faster than 3 percent in the fourth quarter but this may not be the case," Jung Yung-taek, head of national income team at the Bank of Korea, told reporters.
The Bank of Korea's official growth forecast for this year was 4.6 percent, but the central bank internally revised it down to 4.4 percent, another central bank official said.
The central bank is scheduled to announce its 2009 economic growth forecasts next week.
With more gloomy remarks from officials at the government and the central bank, the won currency fell up to 2.9 percent and Seoul shares <.KS11> dropped as much as 4.85 percent.
Meanwhile, the Bank of Korea said South Korea's economy grew a seasonally adjusted 0.5 percent in the third quarter, below the central bank's earlier estimate of 0.6 percent. [ID:nSEW000023]
That is the slowest since a 0.5 percent rise in the third quarter of 2004.
It follows quarterly growth of 0.8 percent both in the first and second quarters of 2008.
The central bank's revised data also showed gross domestic product in the third quarter expanded by 3.8 percent from a year earlier, missing the previous estimate of 3.9 percent published on Oct. 24.
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