Korea to face slower growth on global woes

SERI: Dormant global  economy will drag  down growth to 3.6%


Samsung Economic Research Institute on Wednesday said the Korean economy would grow at a slower pace of 3.6 percent next year on dormant global economic conditions.

The world economy would also show slower growth of 3.5 percent next year, down from a 3.8 percent forecast, according to Chung Ki-young, president and CEO of the institute at a weekly meeting of Samsung executives.

“The cause behind the sluggish growth we are forecasting for the Korean economy mainly has to do with exports, which are likely to slacken on account of a slump in global economic conditions,” Chung said.

The local economy depends heavily on exports, with most companies shipping products overseas to generate profit. Rising raw material prices, coupled with nagging worries about Europe’s rapidly deteriorating fiscal health have recently led manufacturers to express concerns about such shipments.

“A 1 percentage-point decrease in the global economic growth rate translates into a 4.2 percentage-point drop in export volume,” the institute chief explained.

Domestic demand, meanwhile, still remains weak and is not strong enough to compensate for the downturn in exports, he added. 

So far, the government has been playing a central role in bolstering the economy with stimulus measures, but this also has reached a limit as government coffers have stretched thin on the growing costs of expansionary policies.

Adding to Korea’s concerns about diminishing exports is the high-flying exchange rate between the local currency and the U.S. dollar.

The exchange rate is likely to slightly stabilize to about 1,060 won against the greenback, the Samsung institute forecast.

Crude oil prices were expected to fall as well, to around $90 per barrel next year from this year’s $105.

The institute regularly issues the ensuing year’s economic growth forecasts in September, based on which the Samsung affiliates map out their business plans.

Meanwhile, Samsung Group on Wednesday appointed Chang Choong-ki, 57, as deputy chief at the company’s strategic planning unit headed by Kim Soon-taek.

Samsung said it named Chang to assist Kim, who has been serving as group owner Lee Kun-hee’s right-hand man on future business opportunities and other core management issues.

Samsung said it saw the need to provide Kim with more personnel support after Kim began to directly report to Lee, who has started to work regularly from Samsung’s southern Seoul headquarters since April.

Chang had previously headed the group’s communications team.

By Kim Ji-hyun (jemmie@heraldcorp.com)