South Korea's economy is geared for positive advance in 2010. so says a Reuters report released today(30 December 2009.It will probably grow by more than 5 per cent next year on the back of the successful effect of the government’s stimulus spending, says President Lee Myung-bak.
This is above the Ministry of Strategy and Finance’s official target of 5 per cent gross domestic product growth next year announced this month, and far higher than the central bank’s forecast of a 4.6 percent gain.
South Korea apparently has overcome the crisis ahead of other countries and international organizations' forecast that the economy would grow by about 4 per cent next year.
A statement from the presidential office, the Blue House, quoted Lee as making the remarks during a meeting to review public construction work projects due for next year.
The central bank estimated this month Asia’s fourth-largest economy would grow by 0.2 per cent this year, far better than earlier expectations for a steep decline, given the positive effects of a massive stimulus spending and monetary easing by the authorities.
Underlining the optimism, the central bank said early on Wednesday a key index measuring how local manufacturers assess their business outlook for January 2010 hit a two-year high of a seasonally adjusted 93, up from 86 in December.
South Korea’s economy derives more than half of its annual output from domestic service industries but exports of manufactured goods, ranging from cars and mobile phones to chips and ships, still play a critical role.
The upbeat economic prospects have prompted investors to bet the country’s central bank would start to raise interest rates early next year to prevent extra-low credit costs from fanning asset price bubbles and broader inflation.
The Bank of Korea held the benchmark 7-day repurchase agreement rate steady at record-low 2.0 per cent for the past 10 consecutive months after six cuts totalling 3.25 percentage points. It will next review the rate on Jan. 8.
Bond investors shrugged off the central bank data and Lee’s remarks, while awaiting more important industrial production data due to be released later in the day.
Analysts surveyed by Reuters this week forecast South Korea’s industrial output index would rebound by a seasonally adjusted 2.3 per cent in November over a month earlier after an unexpected 3.8 percent fall in October.
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