IMF revises up its growth outlook for S. Korea to minus 3 pct

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By Koh Byung-joon
SEOUL, July 7 (Yonhap) -- The International Monetary Fund (IMF) Tuesday revised
up its 2009 growth outlook for South Korea, forecasting that its economy will
contract 3 percent as the government's "rapid" and "comprehensive" stimulus
measures helps limit its downturn.
In April, the IMF forecast that the economy would undergo a 4 percent
contraction. The latest outlook is still worse than the government's projection
of minus 1.5 percent growth for this year.
"The authorities' rapid and comprehensive fiscal, monetary and financial policy
response helped limit the depth of the downturn in the wake of the global
financial turmoil. Recent indicators point to a recovery in industrial production
and exports," the IMF said in a statement.
The statement was unveiled after an IMF team led by Subir Lall, the IMF's
division chief of the IMF Asia-Pacific department, wrapped up its two-week annual
meeting with Seoul's policymakers to assess its economic conditions.
"The likely moderate pace of global growth is expected to limit the strength of
exports going forward, while weak labor market conditions suggest private
domestic demand is also likely to recover only sluggishly," he said, "As a
result, output is expected to contract by 3 percent for 2009 as a whole, before
growth turns positive in 2010."
The assessment is in line with a positive view by Olivier Blanchard, an IMF
senior economic counselor who said during his visit here earlier in the month
that the organization will upgrade its growth outlook for South Korea as exports
and financial markets begin to stabilize following a global crisis.
Optimism is growing that the nation's economy is seeing some signs of improvement
from its steep slide as a global recession hit its export-dependent economy. The
government's diverse stimulus measures including tax cuts and expanded fiscal
spending also contributed to easing the downturn, observers say.
The economy managed to avert a technical recession as its gross domestic product
rose 0.1 percent in the first quarter from three months earlier, after falling
5.1 percent in the last quarter of 2008, according to the central bank.
On Monday, the state-run think tank Korea Development Institute struck a positive
note about the economy, saying that it "appears to be moving away from the
declining phase," as a steep contractions in domestic demand and exports are
abating fast.
The IMF, however, stressed that the outlook is subject to "substantial
uncertainty" as there are downside risks that could weigh on its economy
including oil price hikes.
kokobj@yna.co.kr
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