World Bank ups 2009 growth outlook for S. Korea

SEOUL, Nov. 10 (Yonhap) -- The World Bank has revised upward its 2009 growth
outlook for South Korea's economy, saying the country's large-scale stimulus
measures helped induce a faster-than-expected rebound in Asia after the region
was hit hard by last year's financial turmoil.
In its latest report assessing economic conditions of major Asian countries, the
bank forecast that South Korea's gross domestic product will shrink 0.7 percent
this year, up from the 3.0-3.5 percent contraction it predicted in June. Growth
will rebound by 3.7 percent next year, also up from its June forecast of a
2-percent advance.
The revised growth forecast is higher than the one offered in the latest report
by the International Monetary Fund, which expected the Korean economy will shrink
1 percent this year, up from its earlier projection of a 3 percent shrinkage.
"A vigorous and timely fiscal and monetary stimulus in most countries in East
Asia, led by China and Korea, along with decisive measures in developed economies
to prevent a financial meltdown after the collapse of Lehman Brothers, have
stopped the decline in activity and set in motion the regional rebound," the
report said.
Hard-hit by the global financial turmoil last year and the resulting recession in
major economies, the export-driven South Korean economy is feared to fall into
negative growth this year for the first time in more than a decade.
Korea's exports plunged and consumption froze with companies unwilling to invest
or recruit due to jitters that economic conditions could worsen at home and
abroad.
The downturn, however, seems to have slowed in recent months, apparently led by
the government's swift stimulus measures including expanded fiscal spending and
tax reductions coupled with the lowest-ever borrowing costs offered by the
nation's central bank.
During the third quarter, South Korea's GDP expanded 2.9 percent compared with
three months earlier, the fastest advance in over seven year. The rebound
compares with a 5.1 percent plunge posted during the last quarter of 2008.
Those figures added to upbeat mood here that South Korea's economy could avoid
the first minus growth in more than a decade this year, driven by recovering
exports, investment, consumption and other major indicators.
Earlier, the finance ministry assessed that the nation's economy is making a
"better-than-expected" recovery, though uncertainties still remain.
The Korea Development Institute, a state-run think tank, echoed that view, saying
South Korea's economy remains in the "recovery phase" as exports, consumption and
other indicators are rebounding fast, driven in part by eased instability in
overseas markets.
The government currently predicts that Korea's economy will contract 1.5 percent
this year, the first minus growth since the 1997-98 financial crisis. Some
policymakers, however, cautiously say that the nation could avoid minus growth
this year, citing improving economic conditions at home and abroad.
kokobj@yna.co.kr
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