KOREA'S TOP POLICYMAKERS AT ODDS OVER GROWTH FORECASTS.

SEOUL, Sept 16 Asia Pulse - South Korea's top economic policymakers made conflicting predictions today about this year's economic growth forecast in the wake of Typhoon Maemi and mixed views over general domestic conditions.

Deputy Prime Minister for Finance and Economy Kim Jin-pyo maintained that 3 per cent growth remains an attainable goal despite some setbacks, while Bank of Korea (BOK) Governor Park Seung voiced pessimism about growth predictions, saying lower growth was more likely.

Kim stressed in an Internet-based state policy newspaper that damage caused by the recent typhoon would have some effect, but the timely rebuilding of damaged or destroyed infrastructure and production capabilities will help revive economic activity in the remaining months of the year. He cited the revival of consumer spending, starting from August, as another reason for his upbeat estimate.

The ranking official also said global economic conditions were improving and the local construction market as well as exports were showing healthy growth. He claimed such developments should allow the economy to regain full buoyancy in the fourth quarter and attain 4-5 per cent growth in 2004.

However, the central bank governor painted a different picture of existing and future conditions by claiming that economic recovery may well be delayed.

At a meeting of heads of state and commercial banks, Park conceded that 3.1-percent growth predictions made earlier by the BOK may have been premature since no such signs have emerged so far. He said that notwithstanding the hopes, economic figures being compiled for the third quarter were not promising.

More specifically, the central banker expressed concerns over tepid consumption, weak corporate capital spending and overall output. He added that even with cuts made in key interest rates, the money supply has not increased, resulting in low demand for new investments.

The BOK chief further said the recent surge in the number of credit delinquents, which has exceeded 3.3 million people or 15 per cent of the workforce, may hinder private consumption and financial institutions' profits.

Household loans of over 440 trillion won (US$375 billion) and 400,000 unemployed young people have also been cited as factors that could limit growth.

Fitch Ratings said in its sovereign rating evaluation of South Korea that only a modest recovery could be expected in the last six months of 2003 and GDP growth may not reach 2 per cent.

The international ratings agency added that this will be the case even if Seoul uses a supplementary budget to stimulate demand.

(Yonhap) 16-09 1927