IMF revises up 2010 growth outlook for S. Korea to 6.1 pct

SEOUL, Sept. 2 — The International Monetary Fund on Thursday revised up its 2010 growth outlook for South Korea's economy to 6.1 percent from its earlier estimate of 5.75 percent, citing the positive impact of government-led stimulus measures and improving global trade conditions.

The forecast released here by the Ministry of Strategy and Finance is higher than the 5.8 percent gain expected by the South Korean government and the 5.9 percent growth predicted by the Bank of Korea (BOK).

"The IMF gave high marks to the stimulus-oriented macroeconomic policy pursued by Seoul since late 2008, financial stances that support such bolstering measures and normalization of the country's trade," the ministry said in a statement.

The Washington-based organization, however, said South Korea's economic growth will slow down to around 4.5 percent in 2011.

Despite the anticipated high growth, inflationary pressure on Asia's fourth-largest economy will be manageable, the IMF said, noting that inflation averaged 2.6 percent in recent months, up from 2.3 percent in March, with core consumer prices rising only up to 1.7 percent.

The latest IMF report, made after its annual meeting in June and July, also said that capital inflows have resumed thanks to expectations of economic recovery and excess liquidity in industrialized economies.

The IMF added that South Korea's exports, helped in part by rising demand from China, will continue to do well, although the volume of its trade surplus will be slightly lower than what was attained in 2009. Last year, the country's trade surplus reached a record $ 4 billion.

The international organization, meanwhile, said South Korea's foreign reserve rose by $ 75 billion to $ 274 billion as of late June compared to 2008.

The IMF said that while the BOK raised its key interest rate by 0.25 of a percentage point in July to 2.25 percent, the country as a whole maintained an expansionary monetary posture.

The capital adequacy ratio of South Korean banks stood at around 14.6 percent, up 2 percentage points compared to what was reported during the 2008 global financial crisis, the IMF said.

Meanwhile, the Korea Center for International Finance said major investment banks around the world expected South Korea's economy to grow an average of 6 percent this year, up from around 5.7 percent tallied in July.

The center jointly run by the government and the BOK said that of the nine banks checked, only Citi and Goldman Sachs said the South Korean economy would grow 5.5 percent and 5.3 percent, respectively, this year with others expecting the country's gross domestic product to advance 6.0-6.3 percent.

Barclays and Morgan Stanley predicted the country's current account surplus would be bigger than previously estimated, while Nomura Holdings said rises in business investments and household earnings should allow South Korea's growth to reach 4.0 percent in 2011 and 5.0 percent in the following year.

Others such as Moody's said South Korea's economy is currently not burdened by inflationary pressure raising alarms in other Asian countries. This can permit the central bank to maintain monetary policies that can help sustain ongoing growth, it said. (PNA/Yonhap)

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