Seoul - Leading economic indicators in South Korea show the
economy may be getting back on its feet after being hit hard by the
global economic downturn.
The country's composite index of leading indicators, which
estimates future economic activity, rose in April for the fourth
consecutive month, providing a glimpse of a rosier outlook.
All ten components of the index including the ratio of job
openings to job seekers, capital goods imports and the amount of
construction orders, turned positive in April for the first time in
seven years.
The index hit 114.7 in April, seeing a 1.6-per-cent hike from the
previous month, the highest figure since May 2008.
A figure above 100 means the economy is expanding and provides an
optimistic forecast, while a figure below would indicate a downturn.
A report by the Korea Institute of Finance (KIF), a leading South
Korean think tank, says that normally once the country's composite
index of leading indicators turn positive, the economy hits bottom in
three to seven months.
'We can say that the South Korean economy is currently bottoming
out or will hit bottom soon,' said Chang Min, a research fellow at
KIF.
Chang added that there is no doubt that key economic indicators
show the South Korean economy has gone through the worst and is
slowly moving towards improvement.
Another report by the LG Economic Research Institute, a think tank
of conglomerate LG Group, forecast that the economy will bottom out
and slowly recover from the end of this year or early next year.
With signs that the South Korean economy is hitting rock bottom,
hopes are rising that this trend could soon turn into an upward swing.
But economists are cautious about the road ahead.
'The economy may be bottoming out, but a rebound will not be
easy,' said Chang, 'It may rather be moving sideways for a while.'
The South Korean economy, which relies heavily on exports, is
expected to continue to be affected by global economic trends.
Experts said the biggest impact would come from consumption in
developed countries. If consumption does not pick up in the latter
half of this year, South Korea's exports will decrease.
While the global economy has been sustained by government stimulus
measures worldwide this year, South Korea's economy may be in for
another blow when those measures peter out.
Chang predicted the South's economy to pick up in the first half
of 2010, and move toward a full-swing recovery in the latter half.
However, the form of this recovery remains a matter of concern.
'Although the South Korean economy may see a U-shaped recovery,
there's a 50-50 chance that it will be a W-shaped one,' said Ahn Soon
Kwon, a research fellow at Korea Economic Research Institute.
As the stimulus measures start to wear out by the latter half of
next year, the South Korean economy may plunge again.
'South Korea has to start recovering early next year, or else
there's a high chance of instability ahead,' Chang said.
But whichever path the economy may be on, for now, South Korean
economists are satisfied with the economic indicators.
'Because the economy is largely subject to sentiment, the
promising index of leading indicators which implies an economic
improvement in about six months is a positive sign,' Ahn said.
'This optimism can affect future investment and consumption,' Ahn
said.
In the meantime, the advice is to take it slow. 'Rather than
moving rapidly, for the time being, economic agents should take on a
stable strategy, putting efforts to build up a strong basis,' Chang
said.
USA
Your Talkback on this Story