SEOUL, jun 25 – South Korea has said the economic downturn has eased and it now expects a contraction of 1.5 percent this year compared with the 2 percent shrinkage predicted earlier.
"The economic downturn has eased, with some indicators pointing to an improvement, but the recovery is still weak," the Ministry of Strategy and Finance said in an outlook report.
"We will maintain expansionary policy for a while as uncertainties linger internally and externally, and strive to normalise the macroeconomic policies over time when the recovery becomes visible."
The ministry left its forecast for 4 percent growth next year unchanged.
On Wednesday the International Monetary Fund said it would give a more optimistic outlook on Asia\’s fourth-largest economy in a new forecast next month. It gave no figures.
The World Bank has forecast that the export-dominated economy will contract 3-3.5 percent this year and grow 2 percent next year, becoming one of the first nations to emerge from the global crisis.
The finance ministry now forecasts exports will decline 16 percent this year before rebounding 11 percent next year. It expects imports to fall 24 percent this year and expand 16 percent in 2010, while the trade balance will probably see surpluses of 26 billion dollars this year and 12 billion in 2010.
The ministry added that the jobless rate will be 3.6-3.7 percent this year and 3.6 percent next year.
But it said the number of people losing their jobs this year will be smaller than expected at 100,000-150,000, due to fiscal stimulus measures and an improved economy in the second half.
In February the ministry said 200,000 jobs would disappear this year.
In 2010, the government expects 150,000 new jobs to be created.
"Thanks to stabilising financial markets and expansionary macroeconomic polices, some indicators are showing signs of improvement," Finance Minister Yoon Jeung-Hyun told a press conference.
"Unlike other countries, our economic growth turned positive in the first quarter with a downturn easing and expectations growing for a recovery."
South Korea averted recession in the first quarter by growing 0.1 percent from three months earlier, after declining 5.1 percent in the last quarter of 2008.
In April parliament approved a 28.9-trillion-won (22.8 billion dollar) extra budget to create jobs and boost domestic demand. The additional budget followed earlier stimulus spending by the government.
The central bank has for four months kept its key interest rate at a record low of 2 percent.
Yoon said the economy is expected to continue to improve markedly in the second quarter. But a continuing rebound into the third quarter remained uncertain due to such factors as rising oil and commodity prices.
"Also, we do not have the same fiscal leeway to support growth as we had in the first half," Yonhap news agency quoted him as saying.
The minister, echoing calls from President Lee Myung-Bak, said his priority in the second half would be creating jobs and stabilising the livelihood of working-class citizens hit hard by the financial crisis.