KDI Lowered Growth Rate Again In Three Months

Korea Development Institute (KDI) adjusted this year’s economy growth rate to 4.0 percent, 0.3 percent lower than April. The KDI forecasted that the consumer price rising rate is to go up 0.2 percent to 4.4 percent.

The KDI announced the `2001 second quarter economy evaluation and prospect` yesterday, in which they foretold this year’s Gross Domestic Product (GDP) growth rate would be lower than the first quarter’s 4.3 percent.

The KDI, which had predicted this year’s growth rate would be 5.1 percent, lowered the rate to 4.3 percent in April due to the slow recovery of the world economy, represented by Japan and the U.S., and a slump in the domestic consumption, the investment on facilities, and the export. It was already second time in year.

The KDI also slashed this year’s economy growth prospect rate of the U.S. (from 1.5 ~ 2 percent to 1.5 percent), Japan (from 1.0 percent to 0.5 ~ 1.0 percent), and EU (from 2.5 ~3 percent to 2.0 ~ 2.5 percent), compared to the first quarter.

It means that due to the dark prospect on the world economy, the economy of Korea will hardly be able to escape from the state of stagnation.

While the growth rate has been lowered, the consumer price rising rate has escalated more than the prospected rate. While the KDI prognosticated the consumer price rising rate as 3.9 percent for the fourth quarter, following 4.2 percent of the third quarter, they forecasted the rate would be 4.4 percent, in terms of the annual overall, 0.2 percent higher than initially expected.

Kim Jun-Il, the chief researcher of the Macroeconomic Management Team in the KDI, said, ``Although there is a sign of recovery in domestic consumption, we lowered the growth rate again since the world economy is still in a frozen state and the depression in export continues.`` ``If the slump in IT related industries that produce major export items continues, Korean economy will face harder time to recover``, added chief Kim.

The KDI suggested for pushing forward the transparent and consistent reconstruction adjusting the economic situation in a practical range. It means that to adjust the economy, the transparent and indiscriminate policy, such as currency or finance policy, is needed to be used rather than the microeconomic policy that is arbitrary and discriminative.

yhchoi65@donga.com