By Kim Yon-se
Staff Reporter


The Bank of Korea (BOK) on Thursday predicted the economy will grow by 4 percent in 2005 and 4.7 percent this year, lower than its initial forecast of 5.2 percent, saying that economic recovery is not likely before next June and the jobless rate would rise to 3.6 percent next year.

The central bank also predicted the current account surplus would reach $16 billion, lower than the estimate of $27.5 billion in 2004, while consumer price inflation would stand at 3 percent next year, lower than the estimate of 3.6 percent in 2004.

BOK economists attributed the lower-than-expected growth projection to an anticipated sharp slowdown in exports and a business investment downturn.

In particular, export growth will nosedive to 7 percent next year from 31 percent this year due to the dollar’s sliding versus the won and the gloomier sentiment in the information technology sector worldwide, the economists said.

According to the BOK, South Korea will grow 3.4 percent and 4.4 percent during the first and the second half of 2005, respectively. It added this could be interpreted as an annual growth of 3.9 percent, but the figures could be adjusted to 4 percent on the basis of year-on-year comparison.

BOK Governor Park Seung said the figures _ 5 percent or 4 percent _ are not so important, adding that 4 percent level growth is high enough. ``The more important matter is people’s livelihoods.’’

Noting that it is hard for the government and monetary policymakers to stabilize people’s incomes, Park said few economists know whether the trend of growth without generating more jobs will continue over the next five years or up to 10 years.

The BOK predicted the unemployment rate will rise to 3.7 percent in the first half of 2005, up from 3.4 percent in the second of 2004. It also said the annual unemployment rate would also inch up to 3.6 percent, compared with 3.5 percent in 2004.

The BOK reported private consumption will possibly go into a recovery pace from the second half of 2005.

The growth in private consumption will record 1.8 percent next year, 0.6 and 2.9 percent in the first and second quarter, compared with the estimate of minus 0.9 percent in 2004, it projected.

The central bank added that corporate facilities investment will also come out of the doldrums from July, predicting 2.8 percent growth in the first half and 7.7 percent growth in the latter half.

Under the darker shadow over the account surplus outlook, the service account deficit is forecast to widen to $13 billion from this year’s estimate of $10.1 billion.

Additionally, the BOK decided to freeze the overnight call rate at the current level of 3.25 percent for December at the monetary policy committee meeting.

kys@koreatimes.co.kr