Downturn hits even S.Korea's 'sacred' education budgets
Reuters - 56 minutes ago
By Yoo Choonsik and Kim Yeon-hee
SEOUL, Dec 29 - South Koreans plan to spend less on education for the first time since the Asian financial crisis a decade ago, underscoring a collapse in consumer sentiment in the learning-obsessed nation, a central bank survey showed on Monday.
The survey's overall consumer sentiment index fell in December to a 10-year low, in a yet another sign of the deepening gloom in Asia's fourth-largest economy, which may be on course for its first recession in 10 years.
In a measure how bad things are, the education index fell below the 100 mark for the first time in 10 years, suggesting families planned to cut one part of their budgets that had been barely affected by economic ups and downs of the past decade.
"Education spending has been regarded as one of the last expenses that South Koreans touch even in economic downturns," said Goh You-sun, an economist at Daewoo Securities.
"The data shows South Koreans are now taking a real hit from the economic difficulties."
The central bank forecasts economic growth to slow to 2 percent next year from 3.6 percent seen this year while President Lee Myung-bak said over the weekend the economy could contract in the first half of 2009 as the result of the global downturn.
"Consumer confidence continued to fall due to declining incomes and an unstable employment situation in the face of the economic downturn," the central bank said in a statement.
South Korea has the highest private sector education spending among the developed nations grouped in the Organisation for Economic Co-operation and Development and is one of the leading nations in terms of the number of students heading for U.S. universities.
The central bank consumer sentiment index had been compiled quarterly before it started producing it on a monthly basis from September to better reflect the rapid changes in economic conditions. It surveyed 2,200 households in 56 cities between Dec. 12-19. It's main index fell to 81 from 84 in November, hitting its lowest since the fourth quarter of 1998.
South Korean authorities have slashed policy interest rates by 2.25 percentage points since early October to a record-low 3.0 percent and approved a 14 trillion won package of fiscal spending and tax cuts to shore up the economy.
Local financial markets have priced in an additional rate cut at the Bank of Korea's next policy meeting on Jan. 9.
But analysts said it would take a long time for such measures to have an effect because the current economic crisis was not only a domestic problem but a result of worldwide financial turmoil.
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