S. Korea to grow in 2002: IMF

S. Korea to grow in 2002: IMF

Reuters, Washington

The International Monetary Fund on Tuesday said South Korea's economy will grow this year, but that uncertainties remain for the short-term and reforms are still needed to ensure sustained growth ahead.

The Washington-based lender said South Korea has dealt with the recent global economic downturn better than many other economies and that the outlook overall looked positive.

The fund said South Korea's economy should grow at an annual rate of 4.0 percent this year, up from an estimated 2.9 percent in 2001. While growth will pick up, inflation is forecast to remain in check at 2.2 percent in 2002, down from 4.1 percent last year.

The fund said that while the economy was poised for growth, uncertainties remained in the near-term, although it also noted that the Bank of Korea still had room for monetary maneuvering in case of further weakness.

Structural reforms were still needed, especially in the beleaguered corporate sector as well as in the financial arena, in order to ensure sustainable growth in the future, the IMF said.

Non-viable companies and corporations with unsustainable losses should be liquidated, the IMF said, expressing concern that the sale of assets of poorly performing companies and financial institutions had slowed.

The lender also said that the bankruptcy system and insolvency laws should be reformed.

While the IMF was pleased with recent progress made in the financial sector, it said that South Korean authorities should continue their efforts to solidify the financial system.

In this regard, it welcomed plans to privatize several banks, which it said will help the institutions operate more efficiently.

The lender also welcomed South Korea's decision to concentrate government spending in the first part of the year, which will stimulate the economy when a boost is most needed. It said, however, that fiscal policy should not "overperform" as it has in recent years.

The fund also said the South Korean government should improve budget planning, and welcomed local authorities' plans to have ministries report monthly on budget execution this year.