South Korea lifts outlook for the year


Korean stock prices are rising Thursday, with Samsung Electronics shaking off any concerns from the strong won

SEOUL, South Korea -- The central Bank of Korea on Thursday raised its take on how the country's economy will fare this year.

The bank now believes South Korea will grow 6.5 percent in 2002, up from 5.7 percent, BOK Governor Park Seung announced.

The bank believes exports will drive the growth. But the strengthening Korean won poses a challenge, making Korean goods more expensive internationally.

The bank elected Thursday to leave interest rates alone for July. Many economists say that is a reaction to the currency's strength.

Stocks up after announcements

The BOK's policy committee let the overnight-call rate stand at 4.25 percent.


South Korea is Asia's strongest developed economy in 2002, despite the construction and logistical costs of the World Cup

South Korean stocks are rising after those announcements. Seoul's key Kospi index is up 1.28 percent at 763.01 in mid-afternoon trade (Asian midday stocks).

The Korean won is stronger at 1,201.8 to the U.S. dollar shortly after noon in Seoul, in a quote from Kookmin Bank.

With the World Cup over, Korea's economy once again revolves around exports and its currency. The Korean won has been on a run of strength against the dollar, much like the Japanese yen.

Technology exports helped the country post growth of 3 percent last year. Korea is the strongest developed economy in Asia in 2002.

Tech exports pressed by won

But a strong currency makes Korean goods more expensive overseas and shrinks international earnings when sent back to Korea. Currency flux of any kind wreaks havoc on corporate planning.

Korean technology companies used the World Cup as a platform for their exports. Players like Samsung Electronics and rival LG Electronics are increasingly influential in Asia.

Samsung Electronics is the world's largest memory-chip maker. But it also makes a broad range of consumer electronics.

Its stock is once again seeing strong international and domestic buying on Thursday. It was up 2 percent to 345,000 won at noon.

LG Electronics, the second-largest Korean electronics maker, has agreed on a deal to export its liquid-crystal display screens to Japan (full story).

World Cup impact tough to assess

That brings it up against rivals such as Sony. Its stock is down 2.5 percent at 49,000 won despite the broad market gains.

The economic impact of the soccer tournament for Korea is not yet known. But early estimates suggest co-host Japan gained much less than the $3.1 billion that many forecasters anticipated.

One stock-picker told CNN that Samsung and LG were the main gainers from the event.

But he said the cooperative benefit of Japan and South Korea successfully holding the event together will be the key corporate outcome (full story).

One-time sporting events often run at a considerable loss. But the long-term gain from increased exposure for hosts and sponsors is tough to tally.

The central bank said Thursday it expects consumer prices to rise 3.0 percent. Most Asian countries face deflation.

The European Central Bank and the Bank of England meet on interest rates later Thursday. Economists expect them to let rates stand.

Australia left interest rates on hold Wednesday, but New Zealand's Reserve Bank lifted the official cash rate by a quarter of a percentage point to 5.75 percent(Full Story).