SEOUL -
The International Monetary Fund
(IMF) on Wednesday forecast that the South Korean
economy will grow 5.5 percent this year.
The international lending agency also predicted the
world's 12th-largest economy will post a current account surplus
of US$4.4 billion, with inflation of 3.5 percent.
"Korea's economic growth rate would slow down to 5.5
percent in 2003 due to shrinking domestic demand, a delay
in global economic recovery and rising oil prices,"
the IMF said in a report on its 2002 consultative
meeting with the South Korean government.
Bolstered by strong domestic demand, the South Korean
economy grew an estimated 5.7 percent in 2002.
The Fund's latest projection is
down from a 5.9 percent growth estimate
unveiled in September, yet is higher than most predictions made by
Korean research institutes.
The IMF said external
and internal uncertainties could send foreign investment
in South Korea falling further in the short term.
Over the mid- and long hauls, however, improved
productivity and the continued inflow of foreign funds
could help bolster the economy's solid growth, it added.
Noting that South Korea's far-reaching corporate
restructuring during the past five years has led to a
remarkable economic rebound and a healthier economic
structure, the agency advised the new government to
expand the country's growth potential through continued
restructuring.
Although
it is not necessary to revise
its macroeconomic policy, the South Korean government
should take prompt measures, including spending a larger
portion of its 2003 budget in the first half, in case
external conditions worsen, it said.
The IMF
also recommended that the government try to make its
budget spending more transparent and make its monetary
policy more flexible for the time being.
Touching on the reform of family-run conglomerates,
or chaebol, the institution suggested South
Korea should continue to supervise and regulate them
when the autonomy of the market is fully
guaranteed.
In order to raise the stability
and efficiency of the financial markets, the
government needs to guarantee the independence of a
watchdog, ease regulations and introduce a variety of
new financial instruments such as long-term bonds, the
IMF said.
The
country's corporate sector needs further
restructuring because about 10 percent of South Korean
firms are unable to post profits enough to cover their
interest costs, despite improving debt-to-equity ratios
and a rise in total profits, it said.
