By Cathy Rose A. Garcia
Staff Reporter
The Korean economy is expected to grow by 4.5 percent this year, amid the backdrop of a "balanced and vigorous" recovery in Asia, the International Monetary Fund (IMF) said Wednesday.
In its World Economic Outlook report for April, the IMF left its earlier projection for Korea's gross domestic product (GDP), made in January, untouched at 4.5 percent. For 2011, Korea's GDP is seen as growing at a slightly faster pace at 5 percent.
"This (Korean growth) reflects not just strong export growth ― with capital exports to China being an important element ― but also a continued boost from the inventory cycle and a boost in business investment in response to high capacity utilization and strong business confidence," the IMF said.
These factors will help offset any adverse impact from the expected withdrawal of the fiscal stimulus this year, the IMF added.
The move came a week after the Bank of Korea (BOK) raised its projection to 5.2 percent from 4.6 percent. On Monday, the Asian Development Bank expected the economy to grow 5.2 percent.
Among the world economies, the IMF said the strongest economic recovery is seen in Asia. Strong domestic demand in India and China is expected to have a positive spillover effect on other Asian economies, including Korea.
In Asia, the IMF said the region's GDP is expected to increase 6.9 percent in 2010 and 7 percent in 2011, bouncing back from 3.5 percent growth in 2009.
"The V-shaped recovery (in Asia) points to an overall slowdown that was more moderate than in other regions. The recovery has also been more balanced in Asia than elsewhere, with output growth in most economies supported by both external and domestic demand. And even though macroeconomic stimulus was substantial, private demand also gained traction in many economies. Ample policy room and strong sectoral balance sheets suggest that for many economies in the region, the recovery will be relatively robust," the IMF said.
Four factors are cited for Asia's recovery: rapid normalization of trade, bottoming out of the inventory cycle, resumption of capital inflows in the region and resilient domestic demand.
India and China will lead the way in Asia, experts said. The IMF sees China's GDP growth at 10 percent in 2010 and 9.9 percent in 2011, while India's growth is at 8.8 percent in 2010 and 8.4 percent in 2011. On the other hand, Japan will grow 1.9 percent this year and 2 percent in 2011, a positive improvement from its economy's contraction by 5.2 percent in 2009.
The IMF said economic prospects vary by region and country, as the world emerges from the deepest economic downturn since World War II. In the United States, a stimulus-driven recovery is under way, as the IMF projected GDP to grow 3.1 percent in 2010 and 2.6 percent in 2011. As for Europe, the region's GDP is projected to grow 1.3 percent in 2010 and 1.9 percent in 2011.