The Korea Development Institute (KDI) yesterday projected Korea would register a 4.3 percent economic growth rate for the year, down from its earlier forecast of 5.1 percent.
The state-funded institute also said the growth rate might fall even to the 3 percent level should the U.S. economy slow down faster than is generally expected.
The KDI predicted the economy would continue to suffer from a lingering slowdown into the latter half of the year.
Exports, for instance, are expected to remain sluggish, due to the weakening global economy and domestic consumption is also likely to stay below par.
The gross domestic product (GDP), a measure of the goods and services produced over one year inside Korea whether by a domestic company or an international company, is expected to grow by 4.3 percent, less than half of Korea's growth rate of 8.8 percent last year, it said.
As a comparison, the National Bureau of Statistics in Beijing recently announced an 8.1 percent growth rate for the Chinese economy this year.
The KDI advised the Seoul government to take flexible measures in the event that the economy is contracting faster than is thought and to push for much-needed corporate restructuring.
Despite the slowdown in the economic growth rate, the institute projects the real economy felt by general consumers to improve, thanks to stabilizing trade terms.
Korea will post a current account surplus of $13.4 billion, larger than the black ink figure of $11 billion last year, as imports contract faster than exports. Trade surplus is expected to top 18 billion dollars, it said.
The consumer price hike was forecast at 4.2 percent this year, double the figure last year, due mainly to a sharp rise in public utility fares and the currency depreciation against U.S. dollar.
The institute said the unemployment rate would hover at slightly above 4 percent.
But the figure would not pose as a serious problem as the unemployment rate has remained within the 4 percent range for some time, it said.
``In view of inflationary pressure on the back of a currency depreciation, it is desirable to keep the interest rate at the current level,'' the KDI said in its report.
The KDI said the government should get rid of destabilizing factors in the financial market, including the troubled Hyundai group. …