Growth in 2nd Half '11 Projected at 4.1%

Economic growth in the second half of this year is expected to register 4.1%, slightly higher than the 3.8% in the first half, because economic conditions are unlikely to improve significantly as internal and external uncertainties that existed in the first half are continuing in the second half.

Citable as uncertainties are the mood of fiscal retrenchment and normalization of monetary policy at home, financial problems in advanced countries and stronger retrenchment in emerging countries, a decline of real estate transactions, etc.

Accordingly, the annual growth for 2011 is expected to stand at 3.9%, far lower than the 6.2% of last year. Affected by such factors as robust increases in employment and household incomes and eased inflationary pressure, private consumption in the second half of this year will rise about 0.2 percentage point from the 3.0% in the first half.

on the other hand, the slowdown in facility investment will continue in the second half due to base effects and increased uncertainties in the corporate investment environment. Construction investment, which recorded a 20% decline in the first half, is also unlikely to improve, posting a decrease of about 0.6 percentage point.

CPI to Rise 3.9% in 2nd Half '11

With a 3.9% increase in the second half, consumer price inflation may ease compared with the 4.3% in the first half. However, the upside risk is high due to increases in farm product prices, rationalization of public utility rates, rises in home rental costs, etc.

Current Account Surplus to Record US$6.4 Bil. in 2nd Half '11

The current account balance in the second half is expected to register a surplus of US$6.4 billion, down from US$8.4 billion in the first half due to the faster growth rate of imports over exports and expansion of the service balance deficit. The Won-U.S. dollar exchange rate is projected to appreciate, affected by a higher U.S. dollar supply situation and an increase in the base interest rate. Due to the spread of the fiscal administration crisis in Europe and the end of the U.S. second round of Quantitative Easing (QE2) policy, however, exchange rate appreciation is expected to be limited.

Caution Needed in Linking Diverse Social Phenomena with Bipolarization

The spread of the social atmosphere that considers even a simple income gap expansion as evidence of bipolarization is a factor that undermines the integration of Korean society. Therefore, equivalent use of the terms income inequality level and bipolarization should be avoided in order to promote social harmony as well as to establish an appropriate economic policy direction.

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