Economy will contract slower in South Korea but the growth will be slow either

The South Korean economy will shrink at a slower rate in 2009 than estimated earlier, the International Monetary Fund said on its Web site. However, it cautioned that the recent growth momentum will likely slow down in the second half of the year, and be followed by a draw-out recovery. Besides, the IMF also raised the possibility that weak global exports could weigh on the South Korea well beyond 2010.

According to the IMF forecast, South Korea's gross domestic product is now expected to shrink 1.8% this year, an improvement on its prediction in July of a 3% contraction, thanks to the nation's fiscal and monetary policy stimulus that helped mitigate the impact of the global economy crisis. Meanwhile, the world lender expects South Korea's GDP to grow by 2.5% in 2010.

Additionally, South Korea's economy grew at a seasonally-adjusted rate of 2.3% in the three months ended June 30 from the previous quarter, when it expanded 0.1% on a sequential basis. On a year-on-year basis, the economy shrank 2.5% in the second quarter, showing an improvement over the 4.2% contraction in the first-quarter.

"There is a distinct possibility that weak global exports will weigh on Korean growth well beyond 2010, as Western consumers permanently increase their savings rates. Other risks to the outlook are another bout of global risk aversion, rising oil prices, or --on the upside -- a stronger impact from stimulus measures in Korea and abroad," the IMF said.