Affected by delay in recovery of domestic demand and slowdown in export growth The Korea Economic Research Institute (KERI) predicted that the Korea's economic growth rate would stay in the latter range of the 4% level in the second half of this year, affected by thedelay in a recovery of domestic demand and slowdown in export growth. In a report on the economic outlook and policy task ahead, the KERI said that the export growth rate would drop in the second half of the year compared with a rise of about 30% in the first-six month period under the influence of the Chinese government's retrenchment policies and the appreciation of Korean won in addition to a technicalfactor coming from the export growth rate increased since the second half of 2003. Helped by a fast rise in exports, Korea's economicgrowth rate in the January-June period of this year is expected to reach 5.4%, getting higher than theoriginal estimation of 5.0%, and its second-half growth rate would stay at thelatter range of the 4% level, lower than 5% in earlier projection, according to the KERI. With a contraction in the gap between exports and imports in growth rate, thecurrent account surplus is forecasted to drop to U.S.$7.1 billion in the second half from U.S.$11.8 billion in the first six-month period of the year. However, annual surplus is expected to reach a record high of U.S.$18.9 billion this year except 1998-1999 right after the foreign exchange crisis. Private consumption is expected to make a gradual recovery to the level of technical rebound, as the jitters on unemployment persists andheavy household loans do not show much improvement, and facility investments would be made only in the limited sector of large-size enterprises that are doing businesses mainly for exports. Construction investments are predicted to decline due to the government's tightened regulations on the market for real estate including houses as well as a rise in material costs. Accordingly, private consumption, facility investment and constructioninvestment, all of which are major factors of domestic demand, are expected to grow 0.6%, 2.2% and 0.1%, respectively, this year, which are much lower than 2.2%, 5.0% and 1.5% projected in April. hogeun@snmnews.com