65% of Economists Say Korean Economy in Crisis

Six out of ten economists say that the Korean economy is in crisis. They also said that the growth rate of the economy this year would not reach the forecast of the Bank of Korea of 3.4 percent, let alone the forecast of the government of 3.8 percent. 

According to a survey of 34 economists from private and national research centers, academia, and financial institutions conducted early last month, 64.7 percent of them responded that the current economic condition is in crisis, the Federation of Korean Industries (FKI) announced on March 8. 

The FKI said that this is corresponding with the findings of the survey conducted early this year. In the survey, 82.8 percent of the top 30 companies responded that they are concerned with a structural long term recession, and 93.9 percent of 800 adults in the nation said that they currently feel the recession in the economic condition. 

Various economic indicators are also backing up the result. The consumer price index in February was 0 percent for three consecutive years, recording negative growth except for 0.58 percentage points from the cigarette price increase. It means that the economy has moved one step closer to deflation, in which prices turn downward and business slows down.

In January, the production in the mining and manufacturing industry decreased by as much as 3.7 percent year-on-year. The figure is the biggest drop in 6 years and a month since it recorded -10.5 percent in Dec. 2008 soon after the global financial crisis occurred. 

The reasons given for the in-crisis response were similar for 15 of the economists, who pointed out the continuous decline in technical gaps with Chinese companies and the absence of new growth power, while another 15 pointed to the domestic demand slowdown from a consistent rise in households debt. Another 11 economists selected the depression in new investment of companies due to the growing economic uncertainties and decreasing operating profits as the reason.

Among them, 92.4 percent forecast that the growth rate of the economy this year would be lower than 3.4 percent. As much as 14.7 percent said it would be the 2.5 percent to 2.9 percent level. The figures numbered less than all the forecasts of the Ministry of Strategy and Finance (3.8 percent), the Korea Development Institute (3.5 percent), and the Bank of Korea (3.4 percent). 

For economic recovery, 41.2 percent of economists said that the economic stimulus acts pending at the National Assembly, including the Tourism Promotion Act and the Basic Law on Service Industry Development, need to pass as soon as possible. Also, 26.5 percent of them recommended generous support for R&D, while 8.8 percent pushed for social overhead capital investments and the expansion of financial expenses.