Economy to grow 5.3% in 2001: KERI

The business circle appears to see the prospects of Korea's economy in 2001 far gloomier than the government or state-run research institutes.

The Korea Economic Research Institute, which is affiliated with the Federation of Korean Industries, forecast in its report, Economic Prospects and Policy Goals, that the nation's economy will grow only 5.3% and consumer prices will increase 3.8%.

It also said that next year's current account surplus would amount to US$1.35 billion and that the exchange rate would average 1,100 won per U.S. dollar.

Such projections are based on the oil price of US$30 per barrel by next March and US$27 from April.

The outlook is different from the projection by the Korea Institute for Industrial Economics and Trade that economic growth and inflation would reach 6.2% and 3.0% with US$1.6 billion in current account surplus. Also, it has a large gap with the Ministry of Planning & Budget's projection of 6% in economic growth and 2% to 3% in consumer price hike, showing that there exists a big difference in the way government and private sectors on economic outlook.

As for this year's economic outlook, KERI and KIET forecast the economic growth rate at 8.5% and 8.7%, consumer price inflation at 2.4% and 2.3%. However, KERI anticipated that this year's current account surplus would amount to US$7.03 billion, whereas KIET projected US$9.6 billion, thus showing a gap of more than US$2.5 billion.

"With the soaring international oil prices, the growth of the nation's economy will slow further from September, and consumer prices will rise substantially," Huh Chan-Kook, senior researcher at KERI, said:

Huh anticipated that the Korean economy might recover on a gradual basis from April next year. In particular, he said that Korea might face pressures for wage hikes and inflation from next year, adding that an austere and crystal-clear restructuring is required for the survival of the fittest, shifting away from collective paternalism.

Lee Byong-Ki eye@donga.com