Korea is an underperformer: ADB

Korea is an underperformer: ADB


Korea`s economic growth rate in 2006 is likely to be the lowest among
the 10 emerging East Asian economies except the Philippines. While the
average growth rate of the 10 countries is forecast to top 7 percent
next year for the third consecutive year, Korea is forecast to grow at
around 5 percent, causing concern that Asia`s fourth-largest economy is
stuck in a low-growth trap.
The Asian Development Bank recently forecast the Korean economy would
grow 5 percent next year on the back of robust exports and a gradual
recovery in private consumption.

The ADB`s December report slightly edged up the growth rate target for
2006 from 4.6 percent announced three months earlier.

Yet the figure is 2.1 percentage points lower than the 10-country
average growth rate of 7.1 percent. Korea ranked eighth, together with
Thailand, among the 10 countries, with the Philippines at the bottom
with 4.8 percent.

Among the 10 countries, China was on top with 8.9 percent, followed by
Laos at 8.0 percent, Vietnam at 7.6 percent, Cambodia at 6.1 percent,
Singapore at 6.0 percent, Indonesia at 5.9 percent and Malaysia at 5.3
percent.

The bank said an important issue for the Korean economy is the extent
to which the ongoing recovery broadens and domestic demand revives.

"Given continued weaknesses in the small and medium enterprise sector,
a significant strengthening in domestic demand may take some time to
become self-sustaining," the ADB report said.

The nation`s central bank and other international predictors also
issued similar pictures for Korea.

The Bank of Korea forecast the economic growth will hit 5 percent in
2006, fueled by increasing exports and rebounding consumer spending.

The Paris-based Organization for Economic Cooperation and Development
also said last month Korea`s growth will probably accelerate to around
5 percent next year and that pace is likely to be maintained in 2007.

While the ADB and other leading predictors released relatively positive
outlooks for next year, the country`s private think tanks took more
cautious stances.

Chung Moon-kun, an economist at the Samsung Economic Research
Institute, said the economy will attain 4.8 percent growth in 2006,
warning an oil price hike, new property regulations and a sluggish
global market may dampen the economic growth.

The LG Economic Research Institute expected the economy to expand 4.6
percent, emphasizing the government`s tightening property measures
announced on Aug. 31 will reduce households` disposable incomes.

Vice Finance Minister Bahk Byong-won raised concerns earlier this month
that smaller companies and the self-employed continue to manifest
financial difficulties, though local households seem to be earning
more.

"These structural weaknesses may hamper a full-blown recovery in
consumption," he said.

(kkt@xxxxxxxxxxx)


By Ko Kyoung-tae

.

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