Korea's Economic Growth for 2011 Projected at 4.1%

Major factors that may contribute to slower Korean economic growth in 2011 are expected to be U.S. public and private debt adjustment, Europe's fiscal retrenchment, stagnation of the global economic recovery following China's belt-tightening policy externally and weakening of economy-boosting potential caused by normalization of its macroeconomic policy tone, end of base effects enjoyed in 2010, etc.

Considering the fact that the nation's average growth rate over the past 10 years (2001~1010) is 4.2%, however, the projected growth rate of 2011 can be appraised as being close to the nation's long-term growth trend.

Affected by the lessening of economic stimulus effects, interest rate hikes and asset value declines, private consumption may slowdown but it is unlikely to be significant owing to improvements in employment and wages in 2010. Facility investment growth is expected to fall to 7% level, influenced by mitigation of investment pressure on the heels of sharp investment growth in 2010, slowdown in the economic recovery, interest rate increases, and other factors. Construction investment slowdown is expected to continue in 2011 due to the stagration in the real estate sector.

Current Account Surplus to Record US$13.2 Bil. in 2011

Export growth (U.S. dollar basis) may plummet to a single digit due to demand decline following the fiscal retrenchment and household debt adjustment of advanced countries, China's conversion to retrenchment, Korea's foreign exchange currency appreciation and intensified competition in export markets. Imports (U.S. dollar basis) also may decrease, but record higher growth than exports. Due to faster growth of imports over exports, service balance deficit expansion, etc., the current account surplus is projected to contract to US$13.2 billion in 2011 from US$30.6 billion in 2010.

Consumer Prices to Rise 3.0%, Won/USD Fx-Rate to Decline to 1,095 Won

Consumer inflation is expected to remain at around 3% as pressures from the demand side will not be so great due to milder economic growth, and limited international oil prices, and the won currency appreciation trend. Influenced by global dollar weakening, continuation of dollar supply priority and increases in base rates, the won-U.S. dollar exchange rate is expected to decline gradually, falling below the 1,100 won level.

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