S. Korean economy to avoid negative growth this year: OECD

SEOUL, Nov. 19 (Yonhap) -- South Korea's economy will likely avoid minus growth
this year as government-led stimulus measures have boosted domestic demand and
exports are making a steady rebound from the global recession, an international
economic body said Thursday.
In its latest economic outlook report, the Organization for Economic Cooperation
and Development (OECD) expected South Korea's economy to expand 0.1 percent this
year before rebounding 4.4 percent next year. The prediction is higher than the
negative 2.2 percent and positive 3.5 percent the Paris-based group predicted in
June.
"Korea has rebounded strongly after suffering one of the sharpest output declines
in the world in the final quarter of 2008 and an unprecedented drop in exports.
In contrast, Korean exports expanded at a double-digit rate during the first
three quarters of 2009 despite the contraction in world trade," the report said.
"The recovery was bolstered by measures to counter the financial market
instability that resulted from large capital outflows, which had led to sharp
falls in asset prices and the exchange rate," it added.
The OECD forecast comes amid growing signs that South Korea is emerging from what
many see as the worst downturn in more than a decade, sparked by the financial
and economic turbulence that started late last year.
South Korea unveiled diverse economic stimulus measures to combat the downturn,
frontloading its budget, reducing taxes and keeping its key interest rate at a
record-low level.
According to the nation's central bank, gross domestic product grew 2.9 percent
in the third quarter from three months earlier, a marked turnaround from a 5.1
percent plunge in the final quarter of last year.
Earlier in the day, Finance Minister Yoon Jeung-hyun said the government expects
that the 2010 growth will be stronger than his previous forecast. The government
anticipates that the economy will contract 1.5 percent this year before
rebounding 4 percent next year.
The OECD said South Korea has achieved "one of the earliest and strongest"
recoveries among its member countries, but it called for the government to
consider rolling back stimulus measures introduced over the past year to bolster
demand and kick-start the economy.
"As the recovery takes hold, the growth of government spending should be scaled
back to bring the budget back into balance, in line with the mid-term fiscal
management plan," the report said.
"Other exceptional measures to stabilize the economy, such as the expanded
support to small and medium-sized enterprises, should be phased out. Structural
reforms to enhance productivity, notably in the non-manufacturing sector, are
needed to sustain growth over the medium term," it added.
The Seoul government has maintained that it will stick to its expansionary fiscal
policy until sustainable growth is assured and weighs the timing for the
so-called strategies polices by watching closely the overall economic conditions.
kokobj@yna.co.kr
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