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Bank of Korea says growth will stem from exports, consumer demand
South Korea's central bank predicted the country's rate of economic growth would decelerate to 4.4 percent in the second half of the year, but said Korea would realize its full-year target of 5.0 percent growth, thanks to brisk exports and recovery in domestic demand. The South Korean economy grew 5.8 percent in the first six months of this year. Last year, it expanded 4 percent overall. "The economy in the second half of the year will be mainly driven by two major engines: exports and domestic consumption," said an official of the Bank of Korea (BOK).The brighter outlook, however, runs counter to research by many economic think tanks, which painted a somewhat bleak picture for Asia's fourth-largest economy in the second half of the year. Among other factors, the won's rise against the U.S. greenback would have an immediate impact on the nation's economy, which depends heavily on export shipments, they said. A strong won makes South Korean products more expensive in overseas markets. The won has gained more than 5 percent against the U.S. dollar this year. Against this backdrop, some experts forecast that the current account surplus for this year would decrease to 4 billion USD, a fourth of what the country recorded last year. The experts also said that the projection by the BOK regarding the drive of exports and domestic demand in the second half is not based on real figures. "The recovery of domestic demand shown in the second half of last year was a one-time phenomenon based on consumer sentiment, not on a real rebound in consumer purchasing power," Song Tae-jung, an analyst at LG Economic Research Institute, said. He added that consumer purchasing power would not have much room to improve this year, considering real income adjusted for inflation as well as the current unemployment rate, high for South Korean standards.
