KIET projects S Korea's economic growth to drop in 2008

SEOUL, June 24 (Xinhua) -- South Korea's economic growth is expected to drop under 5 percent in 2008 as high consumer prices weakens domestic demand, the Korea institute for Industrial Economy and Trade (KIET), a state-run think tank, said Tuesday.

The KIET said in a report that annual economic growth may fall to 4.7 percent from 5 percent in 2007, with exports likely to prop up the overall economy. Corporate facility investment, another key barometer of growth, could slip to 4.1 percent from a solid 7.6 percent from the year before, the report added.

"Domestic demand will be adversely affected by sharp rise in consumer prices that can offset nominal wage gains for many salaried workers," the KIET report said, adding that such developments will hurt the local job market.

The think tank also expected economic growth to fall to around 4.2 percent in the second half from 5.3 percent in the first six months of this year.

According to the report, domestic consumption may move up to 3.3 percent this year, down sharply from 4.5 percent on-year. Consumer prices could jump to 4.2 percent from 2.5 percent in 2007, the report added.

KIET also predicted Customs-cleared exports to grow 17.8 percent on an annual basis to 437.5 billion U.S. dollars, while projecting imports to reach 437.3 billion dollars for a modest trade surplus of about 200-300 million dollars. The sharp rise in imports is mainly due to hikes in international crude oil prices, KIET added.

KIET said exports of display panels, semiconductors and information technology equipment are expected to increase around 20 percent in the second half.

It also said auto production and steel may grow in the coming months compared to the first half, but said there may be a decline in production for the shipbuilding, general machinery, petrochemical, textile and consumer electronics industries.