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SERI Economic Forecasts

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Outlook for Korea's Economy in 2010

Outlook for Korea's Economy in 2010

Nov. 26, 2009

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The Korean economy is on an earnest recovery track thanks to improving domestic demand and exports. GDP growth rate grew 2.9% in the third quarter, expanding at a faster pace than the 2.6% growth in the second quarter. Production, consumption and investment all posted positive growth in September, the first upturn since the bankruptcy of Lehman Brothers. The decline in exports also narrowed to single digit.

Financial markets have also stabilized. The KOSPI has shown a continuous upward trend since March and is hovering at around 1,600 while the won/dollar exchange rate has moved below the 1,200 mark.

Yet uncertainty over the future of the economy remains. With the real economy improving, caution is growing over when the Bank of Korea (BOK) would start to raise its benchmark interest rate and to what extent, and concerns remain over the possibility of short-term funds excessively flowing into the real estate market. Concerns over defaults in US commercial real estate loans and rapidly spreading new H1N1 flu also add to the uncertainties.

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