South Korea's Economy Remains Weak Despite Some Improvement Seen In The Economic Data

The Finance Minister in South Korea said that 'South Korea's economy continues to be weak despite of the improvement seen recently in the industrial output and the consumer spending.' This statement released from the Korean government indicates that still there are concerns because of continued weakness in global demand that might keep the economic conditions delicate.

Throughout the monthly report released by the Ministry of Finance of South Korea, it was added that at the present moment signs of stability in the financial markets have emerged, and this was reflected on the economic indicators of the country; however this is not preventing the economy from weakening, since it lost one of its main pillars that supports growth and that's the exports.

The industrial production during the month of May rose by 1.6% which is lower than the rise seen during the month of April by 2.5%, while the annual industrial production indicated a fall by 9.0% in May which is also worst than the previous reading of -8.3%.

Looking on the bright side, we see that on the monthly basis it's the forth rise in industrial production a row, indicating that the economic conditions are not as bad as the conditions seen in some other neighboring countries like Japan. Its worth mentioning that South Korea managed to avoid falling into recession after recording a growth rate of 0.1% during the first quarter, to be one of the few countries to bravely stand still in the face of this severe financial crisis.

This improvement in the industrial production might be a sign that companies are starting to refill their stockpiles, and not a pick up in neither domestic consumption nor demand on exports, that's why the government is expressing its worries since this growth is not sustained by solid factors able to support growth on the long term.

The Korean government revised on June 25 its assessment regarding this years economic growth, expecting in 2009 the GDP to contract by 1.5% from the previous estimations of a contraction by 2.0%; it also assured it will keep its present fiscal policy in order to keep its support for growth.

Moving to New Zealand, which today announced its cash budget deficit that turned out to be lower than the government forecasts announced in May, totaling 7.14 billion New Zealand dollars in the 11 months ended on May 31, from the previous estimation of a deficit of 8.18 billion New Zealand dollars; this is due to the delay of the 515 million New Zealand dollars payment from the IMF.

New Zealand which was one of the first economies in the world to fall into recession early last year, while the economy keeps on contracting for the fifth quarter in a row, has obtained a 700 million New Zealand dollars from investment revenues; however according to Bill English the Finance Minister the country faces a sharp budget deficit for the next 10 years, because this recession is forcing the government to interfere and support the economy by lowering the income taxes and increased spending.

Finally, today the central bank in Indonesia has cut its interest rates for the eighth similar intervention in a row, and as widely expected the rates reached to 6.50% from the previous 7.00% in an attempt to give further support to the economy which suffers from lower exports while the domestic consumption might help the economy grow 4.6% in the second half of this year.

After the severe rate cuts and the intense stimulus plans adopted by various governments from the Pacific Rim that reached to 950 billion dollars, many hope that the worst of this recession is over and that growth might be seen during this second half of this year, this is why the Indonesian central bank indicated that the rate cuts are near the end especially since inflation is expected to accelerate in the upcoming months.

Ecpulse

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