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South Korea's economic growth was slower in the third quarter than originally estimated, the central bank said Tuesday, further evidence that Asia's fourth-largest economy is being hit by the global meltdown.

Gross domestic product grew 3.8 percent in the three months ended Sept. 30 compared with the same period last year, revised down from the preliminary 3.9 percent expansion announced in October, the Bank of Korea said.

The bank also said that the economy expanded 0.5 percent in the third quarter from the previous three months, down from October's estimate of 0.6 percent growth.

Economists have been lowering their 2009 growth estimates for South Korea given its exposure to the global economic slowdown as a major exporting nation. The economy is expected to slow considerably, with some even predicting it could experience its first contraction in more than a decade.

The official revision to third-quarter economic growth came one day after the government announced that exports fell in November by the most in nearly seven years and automakers took steps to cut production as vehicle demand slumps amid the weak global economy.

Exports dropped 18.3 percent in November from the same month last year to $29.26 billion, the Ministry of Knowledge Economy said. Imports fell 14.6 percent to $28.97 billion for a trade surplus of $297 million.

The ministry cited economic doldrums overseas related to the world financial crisis for the decline in exports. Falling prices for crude oil and other natural resources reduced the value of imports.

The ministry said that exports of South Korean auto-related products slumped 30.8 percent in November.

The November fall in exports was the biggest since December 2001 when they slid 20.4 percent, according to Kang Myung-soo, a ministry official.

Separately, the South Korean unit of General Motors Corp. began an extended production shutdown at one of its four domestic plants.

Production at GM Daewoo Auto & Technology Co.'s No. 2 plant in the city of Bupyeong, near Seoul, stopped Monday as planned and will not resume until Jan. 5, according to Park Hae-ho, a company spokesman. GM Daewoo plans to close down three other plants from Dec. 22 through Jan. 4.

The company is South Korea's third-largest automaker, trailing Hyundai Motor Co. and Kia Motors Corp.

Hyundai, meanwhile, said Monday it was slashing overtime for the first time since 1998.

Spokesman Ki Jin-ho said that the company had decided there was no need for overtime work and weekend shifts in December at six of the company's seven plants in South Korea amid weak overseas and domestic demand.

With the highly proficient National Security Guard commandos having killed the last of the terrorists holed up in the Taj Hotel in Mumbai, the question on everyone’s mind is what effect the tragedy will have on the economy. Despite some clear differences between the Mumbai tragedy and the 9/11 New York calamity, the latter provides a good starting point for answering this question. The effects of the 9/11 events, now extensively studied and analyzed, may be considered at the local level on New York City and at the national level on the United States.

In the immediate aftermath of the 9/11 terrorist attacks, many analysts predicted significant permanent damage to the economy of the New York City. There is now virtual consensus, however, that the effects were smaller than initially predicted and were short-lived. A July 12, 2006, report by the Federal Reserve Bank of New York concluded that the economic effects of the terrorist attacks were sharp but short-lived and had largely disappeared by the end of 2002. According to the Federal Reserve report, New York City recovered from the 2001 recession--well under way at the time of the attacks--at least as fast as the rest of the country. Average incomes in the following four years rose faster for the city’s residents than the rest of the nation.

At the national level, the Sept. 11 tragedy had no measurable effect. A 2002 study authored by Gail Makinen and published by the Congressional Research Service, observed that the initial fears that the event would have serious adverse effects on aggregate demand proved wrong. At the time of the attacks, the economy was in the third consecutive quarter of contraction. By the fourth quarter, growth had resumed. This strongly suggests that any adverse effects of the attacks on aggregate demand were truly short-lived and small in magnitude.

Several factors suggest that the effects of the Mumbai attacks, though devastating for far too many families at the personal level, will be less significant than those of 9/11 attacks. To begin with, the 9/11 attacks were the first ever by foreign terrorists on U.S. soil. They were perhaps also far more dramatic and took many more lives. As such, they left a deep psychological impact on a vast number of Americans, especially in New York. The Mumbai attacks are also more heinous and dramatic--and wider in scope--than anything Mumbai has witnessed previously. Yet they are not entirely new to Mumbai. Psychologically, Mumbai and India are better prepared to deal with such tragedies than the U.S. was immediately following 9/11. This makes the prospects of Mumbai bouncing back rapidly substantially better.

Indeed, I was surprised to learn from my former Columbia student Catherine Delain, who has been on a visit to India for the last three weeks, that she could arrive at Mumbai at 5 a.m. by train from Vadodara immediately following the night of the massacre at Victoria Terminus station, and, within an hour, could also take the train from the Terminus to Aurangabad.

Catherine could observe the signs of the vast tragedy strewn all over in the station and yet found, to her astonishment, that the railway staff was out there going about their jobs as if it were a normal day! And of course, flights into and out of Mumbai never stopped during the 60-plus hours of the clean-up operation.

Equally reassuring was the effect on the stock market. Following 9/11, the stock market in New York had to be closed down for almost a week. When the market opened on Sept. 17, the Dow Jones index, which had closed at 9,605 on Sept. 10, fell to 8,920. In Mumbai, markets opened on Friday (Nov. 28, 2008), after just a one-day break--with the tragedy still in progress. A day earlier, markets in Singapore and elsewhere had reacted negatively, with the rupee declining in value. Yet, the Sensex on the Bombay Stock Exchange rose 0.7% on Friday, reaching a two-week peak.

Nandan Nilekani is limiting his "scarce capital" to company and country.

Nandan Nilekani

Obama made clear that his economic team’s first priority is crafting an economic plan that will both revive the economy in the short term and create 2.5 million jobs over the next two years. And he made equally clear that the deficit is secondary, for the time being, despite projections by some that some the budget gap could reach $1 trillion next year.

“We’ve got to focus first on getting the economy back on track,” he said, acknowledging that “we’re going to see a substantial deficit next year, bigger than we’ve seen in some time,” though he declined to put a number on either the deficit or stimulus spending. “It’s going to be costly,” he said.

Nonetheless, perhaps to emphasize that reining in the deficit will be part of his longer-term planning, he said that on Tuesday, he would address plans to “reform how business is done in Washington, how the budgeting process works” with “meaningful cuts and sacrifices.”

Gains in the Dow Jones Industrial Average, which had risen some 320 points when Obama began speaking shortly after noon Eastern time, fell back to about 225 points over Friday's close after the last question before climbing again to a gain of about 264 points over the following hour.

Although Obama said some of the current administration's efforts to address the financial crisis "didn't work exactly as [intended]," he said they had helped stabilize the financial system. "My administration will honor the public commitments made by the current administration to address the crisis," he said in his prepared remarks.

As has been his habit since winning the Nov. 4 election, Obama said the government must move "swiftly and boldly" to prevent the economic slump from becoming significantly worse, saying "we cannot hesitate or delay." But he also reinforced the prevailing assumption that little in the way of economic stimulus is likely before he is sworn in on Jan. 20, urging "the new Congress" to "work on an aggressive economic recovery plan when they convene in early January." Congress left town last week having passed only an extension of unemployment benefits, with the possibility of returning to provide aid to automakers in December.

Obama also appeared to lay the groundwork for shifting his position on some tax changes, leaving open the possibility that his administration would not seek to quickly undo tax-cuts for upper-income Americans, but rather let them expire by 2011 as they would under current law.

He also supported assistance to the auto industry, but said it must be tied to meaningful reforms by automakers to ensure they remain viable once government aid ends. "We can't just write a blank check to the auto industry," he said. "Congress did the right thing, which is saying, you guys need to come up with the right plan and come back" with it before receiving any financial assistance.

The tone of his comments to reporters at the Hyatt Chicago were grave, warning that the country is "facing an economic crisis of historic proportions." But he tempered that with faith in "the spirit of determination and optimism that has always defined us."

"Again, this won't be easy," Obama said. "There are no shortcuts or quick fixes to this crisis ... and the economy is likely to get worse before it gets better." Then, wrapping up his prepared comments, he added: "I know we can work our way out of this crisis because we've done it before."

The economic team announced at the event was largely as reported over the weekend, with New York Federal Reserve President Timothy Geithner named as Obama's Treasury nominee and former Treasury chief Lawrence Summers named as director of the National Economic Council, making him perhaps Obama's top economic adviser. (BusinessWeek.com has more on Geithner and Summers.)

However, Obama tapped Christina D. Romer, a Berkeley economist and co-director of the committee that officially declares recessions, as director of the Council of Economic Advisers. Many had expected Austan Goolsbee, a University of Chicago behavioral economist and senior campaign economic adviser, to take the position. Romer's work includes research into the U.S. recovery from the Great Depression.

Obama also named Melody C. Barnes as director of the Domestic Policy Council, which coordinates domestic initiatives across the executive branch to match presidential priorities. Barnes, who works at the progressive Center for American Progress think-tank and served as a top domestic-policy adviser to Obama's campaign, will focus in part on health-care reform, working with the administration's Health and Human Services secretary. Former Senate Majority Leader Tom Daschle is expected to take that post.

Heather Higgenbottom, a former legislative director for Sen. John Kerry and founder of a national-security think-tank, will be Barnes' deputy.

That amount, more than the nation has spent over the past six years in Iraq, would rival the sum Congress committed last month to rescuing the country's financial system. It would also be one of the biggest public spending programs aimed at jolting the economy since President Franklin D. Roosevelt's New Deal.

Hints of a hefty new spending program began emerging last week. New Jersey Gov. Jon Corzine (D), an Obama adviser, and Harvard economist Lawrence H. Summers, whom Obama has chosen to lead his White House economic team, both raised the possibility of $700 billion in new spending. Yesterday, Obama adviser and former Clinton administration Labor secretary Robert Reich and Sen. Charles E. Schumer (D-N.Y.) also called for spending in the range of $500 billion to $700 billion.

Transition officials would not confirm that they are considering spending of that magnitude, but they made clear that economic conditions are dire, and suggested that Obama might be forced to delay his pledge to repeal President Bush's tax cuts for the wealthy.

Last week, Goldman Sachs said it expects the economy to shrink even faster by the end of the year, at a 5 percent annualized rate. Meanwhile, the Dow Jones industrial average dropped 5.3 percent for the week; and the nation's largest bank, Citigroup, sought government assistance to avoid collapse.

While Obama has set a goal of creating or preserving 2.5 million jobs by 2011, his economic team -- whose members are scheduled to be formally introduced at a news conference today in Chicago -- have yet to decide how that would be accomplished or how much it would cost.

Still, Austan Goolsbee, a spokesman for Obama on economic issues who is in line to serve on the White House Council of Economic Advisers, yesterday acknowledged that Obama's jobs plan will cost substantially more than the $175 billion stimulus program he proposed during the campaign.

"This is as big of an economic crisis as we've faced in 75 years. And we've got to do something that's up to the task of confronting that," Goolsbee said on CBS's "Face the Nation." "I don't know what the exact number is, but it's going to be a big number."

Republicans quickly criticized the idea of such a vast initiative, saying Congress should instead cut taxes to spur economic growth.

"Democrats can't seem to stop trying to outbid each other -- with the taxpayers' money," House Minority Leader John A. Boehner (R-Ohio) said in a statement. "We're in tough economic times. Folks are hurting. But the American people know that more Washington spending isn't the answer."

With financial markets fluctuating wildly and unemployment rising, Democrats want to push a stimulus package through Congress in January and have it ready for Obama's signature when he takes office Jan. 20. Over the weekend, the president-elect announced that he had instructed his advisers to assemble a massive jobs program that also would make a "down payment" on much of his domestic agenda.

The plan would include new funding for public-works projects to repair the nation's crumbling infrastructure, as well as a fresh infusion of cash to promote green technology and alternative-energy sources. It also would include targeted tax cuts for working families, students, the elderly and job-creating businesses that Obama touted on the campaign trail.

Shares of Tiffany & Co. slipped to a multi-year low before rebounding on Friday, after an analyst warned that softening consumer spending and declining tourism will hurt the jeweler this year and in 2009.

Tiffany shares rose $1.62, or 9.1 percent, to close at $19.48, after setting a nine-year low of $16.75 earlier in the session.

Tiffany, which posts third-quarter results next week, is being hurt by a slowdown in luxury spending in the U.S. and declining tourism, according to Cowen & Co. analyst Laura Champine.

Champine, who rates the stock "Underperform," also expects a weak economy to hurt results in Japan, Europe and emerging markets.

Looking specifically at Japan, Champine said Tiffany's expectation for same-store sales in the country to decline in the mid-single digits "could be bullish," as Champine expects Japanese consumers will scale back on spending.

"We believe the company's outlook for a low-double-digit increase in total sales dollars for the entire Asia region, including Japan, is unlikely," Champine wrote in a client note.

Champine also said economic data in the U.K. has been weak, and this country accounts for about half of Europe's sales.

"We expect a deteriorating outlook for the company's fiscal 2009 European results," Champine wrote.

Champine said it's likely Tiffany will forecast an outlook for fiscal 2009 below Wall Street expectations next week when reporting quarterly results.

Shares of Tiffany have declined 61.2 percent so far this year.