World Business

South Korea raises forecast to highest in four years

By KELLY OLSEN (China Daily)
Updated: 2010-04-13 10:34

South Korea raises forecast to highest in four years

SEOUL, South Korea - South Korea's central bank raised its 2010 growth forecast for the country's economy on Monday to 5.2 percent - the highest in four years - on increased exports amid a rebound in global trade and a recovery in domestic demand.

The Bank of Korea (BOK) had said in December that Asia's fourth-largest economy was likely to expand 4.6 percent this year, but said a revised outlook was warranted "with exports rising and domestic demand, including consumption and facilities investment, recovering".

South Korea's economy recorded four straight quarters of growth in 2009 after contracting in late 2008 amid the global financial and economic downturn. Demand for the country's products including automobiles, flat screen TVs and mobile phones wilted amid the slump.

The country's economy managed annual growth in 2009 of just 0.2 percent, the worst performance since a contraction of 5.7 percent in 1998 during the Asian economic crisis.

If achieved, the forecast announced on Monday would be the best since a similar 5.2 percent expansion recorded in 2006.

Helping boost exports, the BOK said that global trade is expected to grow 5.3 percent this year, compared with a contraction of 12.3 percent last year.

Still, the bank said it remains concerned over what it called a "considerable degree of uncertainty", despite the improved scenario for South Korea's economy.

"The fiscal problems of euro zone countries and the enhanced liquidity control in China exist as disturbance factors in the global financial markets", the statement said.

China - South Korea's biggest trading partner - has been moving to curtail bank lending to try and cool down its fast-growing economy.

The BOK's revised forecast comes after the bank left its key interest rate at a record low 2 percent on Friday at the first monetary policy committee meeting chaired by new Governor Kim Choong-soo, whose term began on April 1.

The bank slashed the rate six times from October 2008, joining other central banks to help battle the global financial and economic meltdown.

The benchmark borrowing cost has been at the current level since February last year with economists generally expecting it to stay there through the first half of this year.

The BOK also said on Monday that South Korea's economy was likely to grow 4.8 percent in 2011.

Associated Press