The Korea Herald


Will IMF lift prediction on Korea’s 2011 growth?

By 김연세

Published : Jan. 23, 2011 - 18:35

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The Bank of Korea is focusing on the coming revised outlook of the International Monetary Fund for the 2011 global economy as the U.S. economy is showing positive signs of recovery.

An issue is whether the IMF will revise its forecast on Korea’s GDP growth upward for this year, from its projection of 4.5 percent in October. The figure was identical to the outlook issued by the BOK.

While BOK Governor Kim Choong-soo has hinted at the central bank’s lifting of the growth projection, citing faster-than-expected growth in the U.S. economy, the Washington, D.C.-based organization will unveil its revised outlook on Tuesday.

The U.S. saw its consumer spending post steady recovery in the fourth quarter of last year and the IMF’s coming research report is drawing vast interest in the global market, according to local analysts.

The Korean central bank will announce the GDP growth for the fourth quarter of 2010 on Wednesday and is expected to reflect the IMF’s forecast when it revises its outlook.

The fourth quarter growth could be a significant barometer which would represent whether the local economy is in a robust upward track.

The Korean economy has recovered faster than expected from the global financial turmoil on the back of brisk exports and improving domestic demand. However, its growth momentum is slowing as the world economy continues to stall due to a variety of uncertainties, including the eurozone debt crisis.

In the meantime, BOK governor Kim Choong-soo said last week that the Korean economy is likely to post solid growth this year, suggesting that the bank could upgrade its growth outlook.

“I think the Korean economy is likely to perform better than expected,” Kim Choong-soo in a monthly meeting with CEOs of local commercial banks on Friday.

The following interest rates will be the next point of research of private think tanks and foreign investment banks that have appeared to be more or less pessimistic about the future of the economy.

The growth rates predicted by Samsung Economic Research Institute and LG Economic Research Institute stood at 3.8 and 4.0 percent, respectively, in the fourth quarter.

The state-controlled Korea Development Institute has revised its outlook downward to 4.2 percent from its earlier projection of 4.4. Bank of America Merrill Lynch also revised it from 4.6 percent to 3.6 percent.

In early December, the BOK was also cautious, citing China’s inflation risks and the U.S. Federal Reserve’s rate policy outlook following its quantitative easing as potential uncertainties, prompting it to refrain from moving the rate upwards.

By Kim Yon-se (