S. Korea's economy to grow 4.6 pct in 2011: OECD

SEOUL, May 25 (Yonhap) -- South Korea's economy is expected to grow 4.6 percent this year, an international economic body said Wednesday, revising up its earlier growth projection based on stronger exports and recovering business conditions.
The growth forecast by the Organization for Economic Cooperation and Development (OECD) is higher than the 4.3 percent gain it predicted in November. It also expected that the South Korean economy will grow 4.5 percent next year.
But the growth forecast for this year is lower than the 6.2 percent expansion that South Korea achieved last year and also lower than the government's 5 percent growth outlook for this year.
"After slowing during 2010, growth picked up in early 2011, driven by the acceleration in world trade," the OECD said in its economic outlook report. "Output growth is projected to moderate during 2011 and 2012, resulting in annual growth rates of around 4.5 percent."
The growth upgrade appears to be a somewhat unusual move, given that other major financial institutions and think tanks moved to freeze or consider lowering their outlooks for South Korea, citing uncertainties stemming from soaring crude oil prices and growing inflationary pressure.
Last month, the International Monetary Fund kept its 2011 growth projection for Korea at 4.5 percent. South Korea's state-run think tank, the Korea Development Institute, also kept its growth outlook unchanged at 4.2 percent in its recent report.
The OECD predicted the world economy will grow 4.2 percent this year before accelerating to 4.6 percent in 2012, unchanged from its previous projections.
But it raised outlooks for the United States, one of South Korea's largest trade partners, from 2.2 percent to 2.6 percent this year, while hiking the projections for eurozone countries from 1.7 percent to 2 percent.
Touching on South Korea's growing prices fueled by higher oil and commodity costs, the OECD revised up its inflation outlook from the previous 3.2 percent to 4.2 percent.
The Paris-based organization called for the Bank of Korea (BOK) to raise its key interest rates to help contain inflationary pressure that is mounting due to higher oil and commodity prices.
"Although the BOK has increased the policy interest rate by 100 basis points from a record-low 2 percent in July 2010, monetary conditions are still quite relaxed at this stage of the business cycle," the OECD said.
As risk factors facing Asia's fourth-largest economy, the OECD cited the state of the global markets -- especially China -- and the nation's own currency value that could affect price competitiveness of its products in foreign markets.
It also singled out household debts as another risk factor that could weigh on the nation's economy by denting consumption. "Rising interest rates may restrain private consumption more than foreseen, in so far as heavily indebted households use income gains to repay their loans," it noted.
kokobj@yna.co.kr