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Press Conference: SERI Economic Outlook - Prospects for 2010

Nov. 26, 2009

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Press Conference: SERI Economic Outlook - Prospects for 2010

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SERI successfully hosted its semi-annual press conference at the Seoul Foreign Correspondents Club on 26th November on the economic outlook for Korea in 2010 as well as the fourth-quarter results of SERI's Korea Peninsula Security Index (KPSI). SERI Vice President Lee Keon-Hyok and SFCC President Maeng Joo-Seok presided over the conference with Dr. Kwon Soon-Woo from the Macroeconomics Department and Vice President of SERI and Dr. Dong Yong-Seung, Senior Fellow in the Global Studies Department making the presentations.

Having made a rapid recovery from the global financial crisis on the back of improved domestic demand and exports, the Korean economy will continue to grow in 2010 with a growth rate of 4.3%. However, growth in the latter half of 2010 will be not be as substantial as in the first half due to a decline in the recovery of domestic consumption Dr. Kwon said. With the base effect of negative economic growth in 2009, Korea's economy is projected to make a 6% year-on-year growth in the first half. However, as the economic stimulus effects begin to fade in the second half, the growth rate will fall to 2.9%.

Dr. Kwon continued to state that the won/dollar exchange rate in 2010 will continue to descend. The yearly average is marked at 1,100 with the first-half average at 1,130 and the second-half average falling to 1,070. The won is projected to strengthen even further with dollar depreciation and dollar supply outweighing demand.

Dr. Kwon concluded the presentation by saying that even with a growth rate of over 4% it is too early to say that Korea is totally free from the global financial crisis as there is a possibility of a double-dip recession due to fragile domestic demand. Therefore, devising exit strategies is premature. Dr. Kwon suggested that raising interest rates should be implemented tentatively keeping in mind various factors such as economic recovery, inflationary pressure and swelling asset prices.

Dr. Dong Yong-Seung went on to present the results of SERI's fourth-quarter KPSI. The composite current index for the fourth-quarter and the composite outlook index exceeded the 50 mark for the first time in two years standing at 53.65 and 53.33 respectively.

The results of this quarter's KPSI can be categorized into three features explained Dr. Dong. First is that the current situation on the Korea Peninsula has changed from one of confrontation to one of dialogue due to the active participation of the six-party talk members to resolve the North Korean issue and China's role as the link between North Korea and the world. Second is the positive development in ROK-NK relations thanks to President Lee Myung-Baks North Korean policies. And finally, the third is the shift in US-JAP relations initiated by Prime Minister Yukio Hatoyama and his visions of "out of Asia, into the West."

Finally, Dr. Dong stated that following US-NK bilateral talks, the six-talks will resume in 2010 although an early rapprochement is unlikely. However, if North Korea, who urgently needs foreign economic assistance and the US, who needs to turn its attention to the situations in Afghanistan, are able to reach a consensus, there could be positive developments in the North Korean nuclear issue.

Following the presentations, the conference was rounded off with a Q&A session. Questions concerning key issues were asked by many of the correspondents including the implications of the rise in the interest rate, the denuclearization of North Korea and their goal to become a "strong state" and the significance of a yuan appreciation on the Korean economy.

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