Korea Won - US Dollar Rate to Hover at 1,100 Next Year
The economy is expected to grow 4.3 percent next year and the won-dollar rate will hover at around 1,100 won, the country's leading economic think tank said Thursday.
The Samsung Economic Research Institute (SERI) predicted that the economy would mark 6-percent year-on-year growth in the first half of next year followed by a 2.9 percent increase in the second half. For the whole year, it will average 4.3 percent, 0.4 percentage points higher than the institute's earlier estimate in September.
It is also higher than the government's outlook of 4 percent.
SERI also raised its growth estimate for this year, to 0.2 percent from its previous forecast of a 0.8 percent contraction.
``The economy has been recovering quickly recently on the back of a recovery in the domestic market and of exports,'' the institute said.
However, this will likely slow next year. ``As the global economic recovery slows, so will the country's exports and domestic consumption,'' the think tank said. It expects the global economy to record 2.6-percent growth next year, while developed economies will mark smaller growth of around 1.5 percent.
Inflation will also stabilize, with consumer prices rising 2.9 percent next year. ``High oil prices, wage increases, and the rising aggregate demand following recovery will add to inflationary pressure, but the strengthening of the local currency will offset this,'' it said.
The won-dollar rate is expected to average 1,100 won per greenback next year, as the won, which currently trades at around 1,150 won, gains further strength. ``The dollar supply will continue on current and capital account surpluses, adding to dollar-weakening factors such as the dollar carry trade, the U.S. fiscal deficit, and talks of a new key currency taking the place of the greenback,'' the institute said.
The institute added that there remains the risk of the economy falling into a double dip, even if it marks 4 percent growth next year. ``The domestic economy is still weak, so it could fall into a downturn again unless the global economy gathers momentum for recovery,'' it said, adding that an exit strategy is still too risky an option. ``The interest rate hike should be made very carefully, considering diverse factors such as economic recovery, inflation and asset prices.''
The institute expected the market interest rate to average 6.4 percent, as pressure for an interest rate hike is growing with the economic recovery.
For the global financial market, it cited mortgages on U.S. commercial real estate as the biggest risk factor.
The Samsung Economic Research Institute (SERI) predicted that the economy would mark 6-percent year-on-year growth in the first half of next year followed by a 2.9 percent increase in the second half. For the whole year, it will average 4.3 percent, 0.4 percentage points higher than the institute's earlier estimate in September.
It is also higher than the government's outlook of 4 percent.
SERI also raised its growth estimate for this year, to 0.2 percent from its previous forecast of a 0.8 percent contraction.
``The economy has been recovering quickly recently on the back of a recovery in the domestic market and of exports,'' the institute said.
However, this will likely slow next year. ``As the global economic recovery slows, so will the country's exports and domestic consumption,'' the think tank said. It expects the global economy to record 2.6-percent growth next year, while developed economies will mark smaller growth of around 1.5 percent.
Inflation will also stabilize, with consumer prices rising 2.9 percent next year. ``High oil prices, wage increases, and the rising aggregate demand following recovery will add to inflationary pressure, but the strengthening of the local currency will offset this,'' it said.
The won-dollar rate is expected to average 1,100 won per greenback next year, as the won, which currently trades at around 1,150 won, gains further strength. ``The dollar supply will continue on current and capital account surpluses, adding to dollar-weakening factors such as the dollar carry trade, the U.S. fiscal deficit, and talks of a new key currency taking the place of the greenback,'' the institute said.
The institute added that there remains the risk of the economy falling into a double dip, even if it marks 4 percent growth next year. ``The domestic economy is still weak, so it could fall into a downturn again unless the global economy gathers momentum for recovery,'' it said, adding that an exit strategy is still too risky an option. ``The interest rate hike should be made very carefully, considering diverse factors such as economic recovery, inflation and asset prices.''
The institute expected the market interest rate to average 6.4 percent, as pressure for an interest rate hike is growing with the economic recovery.
For the global financial market, it cited mortgages on U.S. commercial real estate as the biggest risk factor.
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