The Korean economy will likely see a much slower quarter-to-quarter growth in the fourth quarter, as weaker government support and a strengthening won are expected to hurt corporate earnings, experts said yesterday.
They said the possibility of the economy sinking into a recession was very low, but it cannot be ruled out completely.
The economy grew 2.6 percent and 2.9 percent in the second and third quarters, respectively, recovering quickly from a 5.6 percent contraction in the fourth quarter last year.
"A slower growth forecast for the fourth quarter is attributed to phasing out of the fiscal policy effect and the rising won. The two factors strongly buttressed the recovery in the first half," said Bae Sang-kun, director of the economic research division at the Federation of Korean Industries.
"Without further fiscal injection, recovery will surely slow down in the fourth quarter," he said.
The Ministry of Strategy and Finance frontloaded 65 percent of the 272.8 trillion won ($234.7 million) budget in the first half, and spent 13.6 trillion won more in the third quarter than the ministry had originally planned.
Lee Geun-tae, research fellow at the LG Economic Research Institute, agreed with Bae that the private sector's self-sustained demand remains weak, projecting a slower growth in the fourth quarter.
Weaker growth prospects are reflected in the financial industry's forecasts for fourth-quarter corporate earnings.
Financial information provider FnGuide said in a report that 104 local companies listed on the Korea Exchange expect to see their combined operating profits decline by 6.4 percent to 15.4 trillion won in the fourth quarter from the previous quarter.
Samsung Electronics' operating profit is forecast to fall by 8.2 percent to 2.5 trillion won quarter-to-quarter in the fourth quarter and LG Electronics, by 56 percent to 265.7 billion won, the report showed.
Other conglomerates like SK Telecom, KT, Hyundai Steel and Hyundai Heavy Industries will also face a decline in operating profits, the report said.
IBK Investment & Securities said 137 listed firms' combined operating profits are projected to go down by 7.1 percent in the fourth quarter.
However, the possibility of the economy experiencing a double dip is quite low, both Bae and Lee said.
"The risk of double dip is not imminent but I cannot rule out the possibility completely. Even if the double dip concern materializes, it will appear late next year," Lee said.
For the whole year, the economy may see an expansion, although the LGERI had projected a 0.6 percent contraction in September, Lee added.
(Source: The Korea Herald)
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