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Korea may face a sluggish economy in the near future.
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Oil prices, weakened dollar could take their toll, experts warn
The South Korean economy, which has enjoyed four years of steady growth, could lose its steam due to outside factors, mainly high oil prices and the weakened dollar, experts said. They called on the government to take countermeasures to minimize negative effects on Asia's fourth-largest economy. Gloomy outlook "Though the International Monetary Fund (IMF) revised its global economic forecast to 4.9 percent growth, higher than its previously predicted 4.3 percent, things could turn around if a weak dollar continues to be in place, which could push the global economy into a recession," Jin Byung-Hwa, head of the Korea Center for International Finance, said in a lecture on Friday. On the same day, at a state economic policy meeting presided over by Finance Minister Han Duck-soo, participants reportedly raised similar concerns: skyrocketing oil prices and a strong won against the U.S. greenback could dent the local economy.The economic boom in the past few years could be attributed to China's cheap products, which have lowered the inflation level, and the U.S. serving as a global consuming giant. But, Korea’s "inflation-free" economic expansion has started to lose its ground, as the U.S. raised its key interest rates in order to stabilize rising prices and thus quell inflation. This resulted in an economic slowdown, sparking concerns that years of economic boom in that country could finally be coming to a close. According to a statement on Tuesday by the U.S. Labor Department, domestic inflation was at a higher-than-expected 0.6 percent in April, sending the U.S. stock market into a nosedive. In addition, companies are passing higher oil prices onto consumers, which experts see as a sign that things have reached a point where the companies cannot endure outside economic pressures on their own any more. Some observers also point to leading economic indicators, which dropped for three months in a row. An economic slowdown, interest-rate hikes, as well as dropping property prices could lead consumers to tighten their belts. If the U.S., the largest consumer in the world, cuts its spending, the rest of the world would have to follow suit. "The economic slowdown in the U.S. is expected to remain in place for the time being," said a researcher at Samsung Economic Research Institute. "South Korean exporters will have to brace themselves for it." Hope for soft landing Such a bleak outlook for the global economy is mostly blamed on the recent nosedive of the U.S. stock market, which in turn prompted simultaneous fluctuations in other nations. Some experts countered that the U.S. economy is not likely to suffer a sudden contraction. There argument is in line with the IMF's forecast that the world's largest economy will grow 3.5 percent this year, higher than its previously expected potential of 3.2 percent. China is expected to exceed its previous forecast of a 9 percent economic growth this year, the fund said. Japan, which emerged from its so-called economic "lost decade," will stage a recovery this year by recording an estimated 2-percent growth on the back of brisk domestic consumption, while Europe is showing clear signs of a turnaround. "It is not appropriate to synchronize the short-term ups and downs of financial markets to the [health of the entire] economy," a Finance Ministry official said. "Of course, there are some factors which could cause the U.S. economy to slow down. But I still think the U.S. economy would succeed in a soft landing."
