By Kim Yon-se
Staff Reporter


South Korea’s gross national income (GNI) posted zero growth in the second quarter, meaning it saw no rise in real purchasing power in those three months from a year earlier despite a modest growth in gross domestic product (GDP).

The real GNI figure is the lowest since a 6.1 percent fall in the fourth quarter of 1998 when the nation was hit by a devastating currency crisis, the Bank of Korea (BOK) said in a preliminary report Friday.

The stalled growth in national income reflects a sharp rise in oil prices that adversely affected trade. Higher import costs offset the nation’s export earnings, cutting into purchasing power.

``Oil prices climbed to record-high levels, while prices of export products kept falling, resulting in no growth in national income,’’ a BOK official said.

He also said an increase in the payment of dividends to foreign stock investors has negatively affected the real GNI figure.

GDP grew 3.3 percent year-on-year in the second quarter, up from a 2.7 percent gain in the first.

The nation’s real GNI growth has steadily declined. In sharp contrast to a GNI growth of 4.7 percent in the first and second quarters of 2004, it dropped to 3.6 percent in the third quarter and decreased further to 2.3 percent in the fourth.

It fell still further to 0.5 percent in year-on-year growth in the first quarter of this year.

The gap between GDP and GNI figures reflects the gap between economic data and what people feel about the economy. This means that despite the 3.3 percent growth in GDP, people’s purchasing power in reality gained little to nothing.

GDP growth in the first-half reached three percent, with 2.7 percent growth in the first quarter. If the central bank wants to meet its growth estimate of 3.8 percent, the second-half growth pace should be more than 4.5 percent.

Last December, the BOK predicted 3.4 percent growth during the first half of 2005. But in May, BOK Governor Park Seung indicated that the first-half growth rate would stay at three percent at most.

Private researchers are more pessimistic than the central bank over economic outlook.

J.P. Morgan and UBS predict Korea’s GDP growth to stay at 3.5 and 3.3 percent, respectively, this year.

Barclays Capital said that the stabilization of domestic demand is not compensating for the slowdown in external demand. It forecasts the economy will grow between 2.5 percent and 3 percent in 2005.

Even the state-run Korea Energy Economics Institute (KEEI) projects the growth rate could fall below the 3 percent mark due to high oil prices.

On the other hand, some think tanks, such as the state-run Korea Development Institute, the International Monetary Fund (IMF), the Organization for Economic Cooperation and Development (OECD), forecast the economy will post a 4 percent level growth.

Some senior BOK officials say the central bank may consider revising its estimate down again, if the oil prices do not begin to decline.

kys@koreatimes.co.kr