South Korea’s central bank said yesterday it now expects the economy to shrink 1.6 percent this year, revising its earlier forecast of a 2.4 percent contraction, with a return to positive growth in the second half.
The Bank of Korea also raised its growth projection for next year to 3.6 percent from a 3.5 percent forecast in April.
The finance ministry and private economists have made similar upward adjustments in the belief that Asia’s fourth largest economy has touched bottom.
“Korean GDP in the second half is expected to recover to the level before the collapse of Lehman Brothers last September,” the central bank said in a statement.
It said the economy will probably expand 0.2 percent year-on-year in the second half following an expected 3.4 percent decline in the first half.
But it cautioned of downside risks from rising oil prices and the waning effects of the fiscal stimulus.
The bank said exports are now expected to fall 2.8 percent this year, less than a previous prediction of a 9.9 percent slump.
Private spending would likely fall 1.4 percent this year compared with an earlier estimate of a 2.6 percent decline.
Facility investment is expected to tumble 15.1 percent this year while construction investment will probably gain 2.2 percent.
The economy narrowly avoided falling into recession in the first quarter by expanding 0.1 percent from the previous quarter, after tumbling 5.1 percent in the fourth quarter of last year.
Late last month the finance ministry said it expected GDP to contract 1.5 percent this year compared to its earlier forecast of a 2 percent contraction.
It maintained its growth forecast of 4 percent for next year.
The central bank said the country will likely shed 110,000 jobs this year, down from an earlier forecast of 130,000, on the back of government efforts to boost job creation.