Korea's Economic Growth for 2011 Adjusted to 3.9%

A downward adjustment of the 2011 Korean economic growth forecast to 3.9%, 0.2 percentage point lower than the 4.1% projected in January 2011, was made because, despite the positive influence (about +0.6 percentage point) of the U.S. economic recovery, a negative factor (about -0.8 percentage point) associated with sharp international oil and raw material price hikes is expected to have more impact. By sector, private consumption and construction investment projections for 2011 were adjusted sharply lower. Affected by worsened purchasing power following interest rate increases and inflationary pressure, private consumption growth is likely to come in at 3.2%, 0.6 percentage point lower than the previously projected 3.8%. Construction investment, for which mild growth (0.6%) was forecasted earlier, is expected to reverse course to a downward trend for the year due to the housing business slowdown and worsening of construction business, etc. in the wake of a 12% decline in the first quarter of 2011.

CPI Growth Adjusted to 4.2%

A 1.0 percentage point upward adjustment was made in the consumer price index (CPI) growth projection compared with the earlier forecast due to worsened price environments since early this year, making it difficult to improve significantly as the world faces a high oil price situation, influenced by the Middle East crises and Japan's major earthquake.

Current Account Surplus to Fall to About US$12 Bil.

Due to the faster-than-expected appreciation of the Korean won against the U.S. dollar and an increase in the import account caused by higher international oil and raw material prices, the current account surplus is projected at US$12.8 billion, about US$2 billion less than the US$14.5 billion forecasted earlier. The won-U.S. dollar exchange rate is expected to decline gradually to average less than 1,080 won for the year., affected by a continuation of the higher U.S. dollar supply market.

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