Korea`s economy to grow 6% next year: Moody`s

Moody`s Investor Service expected on Thursday the Korean economy to grow around 6 percent next year, adding to growing optimism about the Korean economy fast recovering from the global economic downturn.

Moody`s forecast of the country`s economic growth next year is higher than even what the optimistic Korean government expects.

The state-run Korea Development Institute last week predicted a 5.5 percent growth for Korean economy next year, and the government is expected to hike its 2010 economic projection to around 5 percent, from the current 4 percent.

"Korean producers saw a big buildup of inventories in early 2008 and cut stocks dramatically in late 2008 and early 2009... Korea`s inventory destocking has begun to turn, and will be a decisive factor in coming quarters, pushing growth higher," Moody`s economic forecaster said.



Meanwhile, private think tanks offered lower economic growth rates for next year than Moody`s and the Korean governments.

Samsung Economic Research Institute predicted on Thursday the country`s economy to grow 4.3 percent next year. SERI has previously predicted the economic expansion by 3.9 percent in September. LG Economic Research Institute forecast a 4.3 percent growth in September, while Hyundai Research Institute projected a 3.9 percent growth that month.

The difference stems from the prospect of private consumption, SERI said.

"Domestic consumption is recovering faster than expected, led by the government (economic stimulus spending). But we do not see the expansion in domestic consumption will continue next year," Hwang In-seong, a senior researcher of SERI told The Korea Herald, citing a fall in government budget in 2010.

The Korean economy is fast emerging from the global downturn, led by government stimulus measures and the recovery in exports. Government and private think tanks forecast that the Korean economy will avoid negative growth this year.

The Moody`s report also said the Korean economy is likely to see a 0.2 percent of gross domestic product growth this year, citing the strength of Korea`s rebound.

"Property market activity is strong, exports are recovering and fiscal stimulus continues to flow through," the economic research and analysis part of Moody`s corporation said on an emailed report.

The Bank of Korea, the country`s central bank, has forecast in September that the economy will grow 3.6 percent next year. Both the government and the central bank will announce their new economic growth forecast next month.

In the beginning of the fourth quarter in September, other foreign economic growth forecasters, including Standard & Poor`s have predicted that the Korean economy may grow more than 4 percent in 2010.

(christory@heraldm.com, hjjin@heraldm.com)







By Cho Chung-un and Jin Hyun-joo