S. Korean economy likely to fall into recession: report

SEOUL, Jan. 7 (Yonhap) -- South Korea's economy is likely to fall into recession
as domestic demand and exports, the nation's twin growth engines, are sharply
declining in the face of a global economic downturn, a state-run think tank said
Wednesday.
"The possibility of a recession is running high as domestic demand and exports
fall sharply," the Korea Development Institute (KDI) said in a monthly report
that assesses the nation's economic trends.
The report cited shrinking industrial production, consumer spending, investment
and exports as reasons for its gloomy assessment of Asia's fourth-largest
economy.
Industrial production plunged to an all-time low in November, with output
contracting 14.1 percent from a year earlier. Consumer goods sales contracted 5.9
percent over the same period as people scaled down spending on high-priced
durable goods for fear of worsening economic conditions, according to the report.
Indicators also suggested that the contraction in investment is "accelerating,"
the report said. Equipment investment plunged 19.4 percent in November from a
year earlier.
Exports and imports showed a "marked" decrease amid the worsening economic
downturn at home and abroad with their unit prices also falling, the report
showed.
In November, overseas sales contracted on-year 17.4 percent, while imports
plunged 21.5 percent over the same period mainly due to falling prices of oil and
raw materials.
Adding to the woes, deteriorating job markets were weighing on the economy, the
report said. The number of newly-created jobs in November stood at 78,000 in
November compared with a year earlier, far below the government's annual target
of generating 200,000.
The gloomy economic conditions come as the government is struggling to kick-start
the economy, which is slowing at a faster-than-expected pace.
In the third quarter of last year, the growth slumped to 0.5 percent, the lowest
in almost four years, according to the Bank of Korea. The central bank has
projected the economy to grow 2 percent this year.
Finance Minster Kang Man-soo said on Sunday that the economy is likely to recover
gradually from a slump sparked by the global business downturn from the second
half of this year.
The KDI, meanwhile, assessed that the domestic financial markets, once hit-hard
by the U.S.-sparked financial turmoil, appear to be gaining stability "gradually"
thanks to additional currency swap lines and the central bank's aggressive moves
to lower interest rates.
The think tank forecast the global economy will be faced with an "overall
downturn" as economic recession deepens in major developed countries.
kokobj@yna.co.kr
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