By Kim Tae-gyu
Staff Reporter

Moody's Economy.com projected Friday that the Korean economy would expand 7 percent in the fourth quarter of this year. It also forecast that the country would record a positive growth of 0.2 percent for the full year of 2009.

The projection marks one of the most optimistic forecasts for the Korean economy.

``South Korea has seen a very strong rebound, with 12.1 percent annualized growth in the third quarter. This is likely to be sustained into the fourth quarter,'' Alaistair Chan, an economist at Moody's, said in a report.

``Korea could record a 7-percent year-on-year growth rate in the fourth quarter, and that of the first quarter of 2009 could be even higher. We expect growth for 2010 to be around 6 percent.''

The positive prospects came on the heels of projections by both the government and private think-tanks that the nation's gross domestic product (GDP) would expand in 2009 despite the global financial crisis. Many also predict a growth in GDP for 2010.

For example, Strategy-Finance Minister Yoon Jeung-hyun projected that the national output will enlarge by more than 4 percent next year.

The state-run Korea Development Institute put the number at 5.5 percent while Samsung Economic Research Institute expected a 4.3 percent growth.

Meanwhile, Moody's noted that Japan would continue to struggle next year.

``Japan is expected to underperform in relation to the rest of the region. We expect a 5.8-percent contraction in output for the year and around a 1-percent growth for 2010,'' Chan said.

``Firms remain pessimistic and employment conditions are poor, despite an improvement in the latest data. With core prices falling 2.3 percent year-on-year, the government acknowledges that deflation is back, saying that the economy is in a mild deflationary phase.''

Moody's said the contrasting forecasts of the two neighboring countries is due in part to inventory adjustment.

``One reason for the differing outlooks for Korea and Japan is the scale of inventory adjustment. Korean producers saw a big buildup of inventories in early 2008 and cut stocks dramatically in late 2008 and early 2009,'' Chan said.

``Inventory equivalent to 5 percent of the GDP was shed in the second quarter of 2009. Korea's inventory destocking has begun to turn, and will be a decisive factor in coming quarters, pushing growth higher.''

For China, Moody's did not come up with specific numbers but it said that the world's most populous country would enjoy big trade surpluses.

``Its trade balance jumped to $24 billion in October, double September's result,
reflecting a recovery in exports and a fall in imports It is likely that China's trade surplus will widen again,'' Chan said.

thkim@koreatimes.co.kr