South Korea's economy is expected to grow 4.3 percent next year, slowing from this year's estimated 5 percent gain on a slowdown in private spending and the global economy, the International Monetary Fund (IMF) said Friday.
The IMF's growth projection is not much different from the South Korean government's estimate of a mid-4-percent expansion.
The international organization said the Korean economy, despite its modest slowdown this year, remains fundamentally in good shape but faces significant risks.
"Consumption growth is moderating, but this was not unexpected in light of an extended period of consumption growing faster than personal incomes and rising consumer debt," Jerald Schiff, assistant director of the IMF's Asia and Pacific Department, said in a press conference.
"Korea has continued its impressive export performance, and this is expected to continue, with only a modest slowdown in response to lower growth in key industrial economies," he said.
The South Korean economy grew 4.6 percent annually in the third quarter of the year, slowing from the 5.3 percent year-on-year growth recorded in the second quarter, from a slowing recovery in domestic consumption.
The IMF official said Asia's fourth-largest economy is faced with downside risks.
"The most important in this regard is the possibility of a sharper-than-expected slowing in the United States -- in particular from the cooling of the housing market -- which could dampen Korea's exports," he said.
The press conference came after a delegation led by Schiff arrived in Seoul last week to hold a series of meetings with officials from the Finance Ministry, the Financial Supervisory Service and other economy-related agencies.
The IMF also noted that geopolitical developments on the Korean Peninsula could influence business and consumer sentiment, although there are no signs as of yet that the recent nuclear weapon test by North Korea is having an economic impact.
As to rising housing prices, Schiff said there are no signs of a bubble, adding that the current level of the interest rate is appropriate in terms of the macroeconomic cycle.
The Bank of Korea, the country's central bank, froze its key interest rate at a five-year high of 4.5 percent on Thursday, but expressed concerns about excessive gains in housing prices.
"We don't really view increases in South Korean property prices as a bubble because we think there are real underlying reasons for higher housing prices," he said.
Nationwide apartment prices rose 1.5 percent in October from the previous month, the largest gain since October 2003, according to data from the central bank.
On Thursday, the country's Finance Ministry said that the government will continue to increase housing supply and strengthen the supervision of home-backed loans in a bid to help curb excessive gains in housing prices.
The IMF said that while some increase from the current consumer price inflation rate, which is just over 2 percent, can be expected, overall price pressures are expected to remain moderate in 2007, and inflation is projected to remain contained toward the lower end of the central bank's target range of 2.5 percent to 3.5 percent.
It said lower oil prices are helping to cushion slowing consumption and hold down inflation, but some rise in oil prices from current levels is expected next year and further oil price spikes cannot be ruled out.
SEOUL, Nov. 10 (Yonhap)
S. Korea's economy expected to grow 4.3 pct in 2007: IMF |
