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SKorea's industrial output plunges in December
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SKorea's industrial output plunges in December
AFP - 39 minutes ago
SEOUL (AFP) - - South Korea on Friday reported a record fall in industrial output last month, a further sign that the export-driven economy is set for its first recession in over a decade amid the global economic crisis.
The National Statistical Office said output in Asia's fourth largest economy declined a record 18.6 percent year-on-year in December and 9.6 percent from November.
The plunge follows a fall in November of 14 percent annually and 10.7 percent month on month.
"The contraction stemmed mostly from sharply falling exports and domestic consumption of such products as semiconductors and vehicles," the office said in a statement. "With output declining for two months in a row, an economic downturn seemed to be accelerating."
The central Bank of Korea's governor Lee Seong-Tae reinforced the warning, saying the country will turn in its worst performance since the East Asian financial crisis of 1998.
"Lower growth will lead to less jobs, which in turn will worsen the real economy," he said in a statement prepared for a speech to economists.
Gross domestic product shrank 5.6 percent in the fourth quarter of 2008 from the previous three months, its worst performance in almost 11 years. The economy lost 12,000 jobs in December, the first such drop in more than five years.
Export earnings plunged 29 percent during the first 20 days of January from a year earlier as US and European demand dwindled for Korea's ships, computers, chips, cellphones and automobiles.
Domestic demand also remains weak.
The state-financed Korea Development Institute has reduced its 2009 growth forecast to 0.7 percent but many analysts predict an outright recession.
Korea's current slowdown is increasingly likely to be much longer and deeper than during the Asian financial crisis, said Daniel Melser, senior economist with Moodys Economy.com
The country could recover very quickly from the 1998 recession because overseas demand remained intact, he said in a commentary.
"This time around external demand is non-existent and it will most likely be domestic demand -- investment and consumption -- that will lead the economy out of recession.
"But don't hold your breath for a recovery in these sectors until at least the second half of 2009."
Central bank governor Lee said the bank will decide on the timing and size of any rate cuts in a way that can assist an economic recovery. The bank has cut its benchmark rate by 275 basis points since early October to an all-time low of 2.50 percent.
Its next rate-setting meeting is on February 12.
President Lee Myung-Bak, who won office in December 2007 as the "Economy First" candidate, this week said the worst is yet to come.
"Doubts about unstable economic conditions will continue to spread, so we must not dwell on numbers but set up thorough measures in advance to counter worse conditions to come," he told a special economic committee.
The government has announced extra spending and tax cuts worth billions of dollars to try to prop up the economy.
One project, dubbed a "Green New Deal," would involve the spending of 14 trillion won (10.3 billion dollars) to reduce the effects of floods and drought along four main rivers, possibly creating 190,000 jobs.
The government is also frontloading this year's budget spending in the first half as much as possible.
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