The South Korean economy is showing signs of a slowdown and the government may have to revise its growth target of 6 percent for this year, a senior economic official said yesterday.
Vice Finance Minister Choi Joong-kyung told reporters the government would consider measures to rein in soaring short-term foreign debt but gave no details.
“Recent indicators of domestic demand, corporate investment and employment are showing that the economy is entering a slowing phase,” Choi said after a meeting of key economic officials.
“The job market is in bad shape, with the number of temporary workers declining, a typical sign of a slowdown,” he said.
South Korea recorded 5 percent growth last year. But in the first three months of the year, the economy grew just 0.7 percent quarter-on-quarter — its slowest pace in more than three years.
Choi said that the government could adjust its 6 percent target when it announces a plan for macroeconomic management for the second half of the year. Many analysts see the figure as unrealistic and the central Bank of Korea expects growth of 4.5 percent or lower this year.
“The authorities should closely monitor the overall economy ... and they also need to be watchful that expectations for higher inflation should not set in,” the central bank said in a statement yesterday.
Daniel Melser, an analyst at Moody’s Economy.com, said this year’s growth would slip to 4.2 percent.
“South Korea’s economy looks to be cooling after growth exceeded expectations in 2007,” he said in a statement.
The region’s fourth-biggest but resource-poor economy is grappling with a weak won, rising inflation, high prices for oil and raw materials and lingering global financial uncertainty.
The central bank expects the current account shortfall this year to hover above US$3 billion, which would be the first deficit since 1997.