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S&P: Korean recovery firm, but inflation risks persist
 
 
  
 
 Reuters - Wednesday, March  9
 
 
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March 9, 2011--Standard & Poor's Ratings Services expects the Republic of Korea's growth to moderate slightly to 4.5% in 2011, mainly because of greater uncertainty about the global economy. Korea's economy emerged from the global crisis in relatively good shape in 2010, with above-average growth of 6.1%. But uncertainty over global demand is likely to have an adverse impact on the outlook for Korea's exports. Although private demand is recovering, it is unlikely to grow enough to cover weak exports and investment, implying that the growth rate Korea achieved in 2010 is not likely to continue in 2011.
 
That's according to a guest opinion article recently published by Standard & Poor's, titled "Korean Recovery Firm, But Inflation Risks Persist." In the article, CRISIL Ltd., the Mumbai-based subsidiary of Standard & Poor's, says a possible worsening of economic conditions overseas and rising tensions on the Korean Peninsula are risk factors for Korea's growth prospects. Rising inflation and a flood of foreign capital are the other key risks that the Korean economy faces this year. Korea is also one of the Asia-Pacific region's largest oil importers, exposing it to an expected spike in crude oil prices during the year.
 
The Korean economy recovered strongly in 2010 from the global financial crisis, which pruned the country's growth in 2009 to a mere 0.2%. After rebounding strongly in the first half of 2010, the economy lost steam in the second half, when domestic and external uncertainty increased and government-led recovery efforts faded, sparking concern among investors that the pace of Korea's economic recovery will slow further.
 
Growth expanded at a blistering 7.6% in the first half of 2010 but moderated in the second half to a more sustainable 4.6%. Overall, growth for 2010 was an impressive 6.1%. Most important to this result was a recovery in private-sector growth, due to a sharp rise in domestic demand. Private-sector demand climbed 4.1% in 2010, from an anemic 0.2% the previous year. The government's spending fell as it unwound fiscal stimulus measures during the year. Investment growth, as measured by gross capital formation, surpassed its precrisis level, climbing sharply to 16.3% in 2010, in contrast with a decline a year earlier. Standard & Poor's saw a spectacular rebound in domestic demand in 2010, and we expect this to cushion against muted external demand in 2011.
 
The thoughts expressed in the guest opinion article are those of the writer and do not necessarily reflect the views of Standard & Poor's Ratings Services.
 
The report is available to RatingsDirect subscribers on the Global Credit Portal at www.globalcreditportal.com and RatingsDirect subscribers at www.ratingsdirect.com. Ratings information can also be found on Standard & Poor's public Web site at www.standardandpoors.com; under Ratings in the left navigation bar, select Find a Rating. Members of the media may request a copy by e-mail at tokyo_pressroom@standardandpoors.com or by phone at 81-3-4550-8411.
 
 
 
 
 
 
 
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