By Kim Tae-gyu
Staff Reporter
As the economy shows signs of recovering from the unprecedented financial crisis, market watchers are starting to predict that Korea has a shot at racking up positive growth for 2009.
This is a dramatic turnaround from the gloomy prediction that the economy would shrink by more than 2 percent as was widely projected early this year when the financial distress peaked.
Daiwa SMBC forecast Wednesday that the real gross domestic product (GDP) of Asia's fourth-largest economy would grow 0.1 percent for the whole of 2009 from last year.
This means the brokerage house expects Korea's national output to increase by up to 3.5 percent over the second half of 2009 from a year ago, which starkly contrasts to the first half when the country suffered a 3.4-percent contraction.
"Industrial production expanded 0.7 percent year-on-year for July and the shipment-inventory ratio suggests it will expand sharply from August to October," Daiwa said in the report.
"Leading indicators suggest that industrial production and real GDP are likely to rebound much more strongly in the second half of 2009. Hence, we are revising up our forecast for 2009 to 0.1 percent," it said.
Still, a vast majority of economists here predict a contraction for 2009 including Samsung Economic Research Institute and Hyundai Research Institute.
But the consensus is moving toward more optimism as they have cut down on the degree.
Strategy and Finance Minister Yoon Jeung-hyun gave optimists one more piece of good news Wednesday - that the economy fared better during the second quarter than originally estimated.
The Bank of Korea said late July that the national output increased 2.3 percent over the April-June period from the previous quarter but Yoon said the figure will be updated to somewhere between 2.6 percent and 2.7 percent.
In this climate, economists have come up with more optimistic forecasts.
"It would be a tall task to rack up a 3-percent-plus recovery during the second half. But it is not impossible because the economy has become sanguine and industrial outputs is starting to pick up," said Yoo Jang-hee, professor emeritus at Ewha Womans University.
"Previously, we expected the recovery to start at the end of this year at the earliest. But currently, the recovery is likely to start in September or October."
But Yoo pointed out that the protracted delay in approval of several stimulus packages in the National Assembly is feared to draw back the earlier-than-expected turnaround.
Professor Yun Chang-hyun at University of Seoul concurs.
"The third quarter will be fine. If Korea cruises well in the fourth quarter too, we may achieve positive growth for 2009 although the possibility does not appear to be that big," Yun said.
"The downside risk is the government frontloaded the budget early this year so that it has little to spend now. But we may meet a year-end buying spree if the economy is good in the fourth quarter. The final quarter is the key."