• What is your estimation of Korea

  • It is true that the global economic recession has begun to wreck havoc on the Korean economy in earnest as illustrated by the minus 3.4 percent year-on-year growth recorded in the fourth quarter of last year.

    As a result, institutions at home and abroad are generally forecasting the Korean economy to shrink this year, but their growth estimations vary a little.

    IMF Barclays Citi Deutsche JP UBS KDI
    Jan. 29 Jan. 23 Jan. 23 Jan. 22 Jan. 24 Jan. 28 Jan. 20
    GDP Growth Rate -4% -2.0% -1.8% -4.0% -2.5% -3.0% +0.7%

    However, they have the common view that the mid- to long-term prospect for the Korean economy is bright because Korea has strong economic fundamentals and the government is taking comprehensive and preemptive measures against the external shock, which will enable the economy to recover robust growth once the world economy recovers.

    Although the IMF has also made an estimation of a negative growth for Korea in 2009, it is expecting the Korean economy to start recovery from the second half of the year and continue growing at the fastest rate in the world to record 4.2 percent growth in 2010 (+8.2 percentage points).

    In particular, Korea has a very sound banking sector (BIS capital ratio: 10.86%, total delinquency ratio: 1.0%) and its corporate sector has healthy balance sheets. The government, too, sustains healthy finances.

    < International Comparison of Corporate Financial Structures >

    Current Ratio (%) Capital Ratio (%) Debt Ratio (%)
    US (2007) 133 44 127
    Germany (2005) 126 34 191
    Japan (2007) 131 30 232
    Korea (2007) 125 48 107

    < Estimation of Debt Ratio of Major Economies for 2009 (OECD, Nov. 2008) >

    US Japan Germany France Korea
    Fiscal Balance (% of GDP) 73.2 173.0% 64.8% 72.5% 32.6%

    With the government's continued large-scale pump-priming and liquidity provision efforts, the Korean economy is expected to get back on track from the second half of the year.

    < International Comparison of Fiscal Expansion Size (as of Jan. 2008) >

    Country % of GDP Note
    US 6% 818 billion~887 billion dollars
    Japan 3.3% 17 trillion yen (1st: 2 trillion, 2nd: 5trillion, 3rd: 10 trillion)
    EU 1.5% 200 billion euros by 2010
    * Size of tax cut has not been decided. Only the fiscal expenditure has been taken into account.
    - Germany 2.3% 50 billion euros
    - France 1.3% 26 billion euros
    UK 1% 20 billion pounds by 2009
    (tax cut: 12.5 billion pounds, fiscal expenditure: 7.5 billion pounds)
    China 16% 4 trillion yuan by 2010
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