South Korea growth pegged at 4% in 2002

By staff and wire reports

SEOUL, South Korea -- South Korea's economy will grow at three percent the first half of next year, its Ministry of Finance said Tuesday.

That pace will pick up to 5 percent growth in the second half of 2002, it predicted.

That's good news for a country whose strong showing has inspired investors. The benchmark Kospi index roared to a 14-month high on Monday, driven by overseas buying.

The index was off 1.4 percent on Tuesday morning. But the market has shown steady gains on the back of South Korea's economy, one of the best performers in Asia during the current slowdown.

Overseas investors have been net buyers of Korean stocks since October, the most sustained streak this year.

GDP up 2.7 percent so far this year

South Korea's gross domestic product has posted growth of 2.7 percent through the first nine months of this year, the central Bank of Korea reported last week.

Its economy was still growing in the third quarter, albeit at a slight 1.2 percent, at a time most of Asia is slipping into recession.

The Finance Ministry said Tuesday that South Korea should eke out growth of 2.5 percent for all of 2001. That is down from a heady 8.8 percent last year, and the government is keen to resuscitate growth.

It has propped up the economy with a stimulus package that economics say masks the dip in exports, a key Korean driver. The Finance Ministry said that support would continue.

"The government will try its best to achieve GDP growth of more than four percent in 2002 through elastic operations of financial and fiscal policies and increased domestic demand," the ministry wrote in a report.

Jobless rate steady below 4 percent

But South Korea has also gotten a boost from strong domestic demand. It will get another jolt in the arm in 2002 out of hosting the soccer World Cup. Korea expects hundreds of thousands of visitors as it shares the world's biggest sporting event with Japan.

Experts credit the government of President Kim Dae-jung for driving ahead with reforms. Those changes have been wrenching at times. Job losses at companies like Daewoo Motor have led to violent demonstrations and national strikes.

But the country's jobless rate is falling, the Finance Ministry said on Tuesday. The unemployment rate will stabilize in the high 3 percent range this year, it forecast, down from 4.1 percent last year.

The dip stems from job creation in the construction and services sectors. South Korea's construction and transportation industries still grew at more than 7 percent for the third quarter.

The country's prospects are a stark contrast with its northern neighbor. North Korea has suffered through severe food and power shortages, and its health-care system is close to collapse. Its isolationist economy is one of the most restrictive in the world.

President Kim Jong-il on Monday called on North Koreans to "perform uninterrupted miracles and feats" to revitalize the country. He has launched a drive that he calls Ranam, named after a coal mine in the northeast of the country that inspired him.

Reuters contributed to this report.