South Korea's economy is undergoing a period of adjustment, but decisive measures by the government and sound fundamentals should enable it to begin recovering from early 2005, the International Monetary Fund said on Thursday.
The IMF made the comments in a statement following a recent visit by a delegation of its officials to South Korea.
"Despite these cyclical difficulties, the fundamentals of the Korean economy remain strong. Large enterprises are highly profitable, while the banking system is healthy," it said. "For these reasons, we believe that by early next year, Korea should see the beginning of an economic recovery."
It did not give specific forecasts on South Korean economic growth, but it recently cut its forecasts for growth in gross domestic product to 4.6 percent this year from the previous 5.5 percent, and to 4.0 percent in 2005 from 5.3 percent.
The revised forecasts are lower than the government's target set at 5 percent for both 2004 and 2005. South Korea's economy is the third largest in Asia.
The IMF recommended the South Korean government spur corporate spending by reinvigorating its plans to increase flexibility in the labour market, while expanding the social safety net.
It said it endorsed South Korea's recent moves to boost government spending on the construction sector, as part of efforts to put an end to a two-year slump in private consumption, and to help indebted small and medium-sized companies.
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