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SKorea: Economy could grow 5 percent in 2011 (AP)

SEOUL, South Korea – South Korea’s economy could grow about 5 percent next year amid a steady global recovery and increase in domestic demand, the government said Tuesday.

A possible worsening of conditions overseas, however, is a risk factor for the country that could negatively affect growth, the government said in its economic outlook for 2011.

The government’s view is more optimistic than the Bank of Korea, which said last week that the economy is likely to expand 4.5 percent in 2011.

Both the government and central bank estimate that the economy will expand 6.1 percent in 2010, which is in line with a forecast by the International Monetary Fund.

South Korea, the world’s 15th-largest economy, recovered strongly this year from the global financial crisis and economic slump, which dragged the country’s growth rate last year to a mere 0.2 percent.

The government also cited North Korea, European sovereign debt problems and moves by China to rein in its fast growing economy as factors that will continue to affect South Korea’s economy in the short term.

The Bank of Korea last week noted a “considerable degree of uncertainty” hanging over the economic outlook, citing the aftermath of North Korea’s attack on a South Korean island last month, European debt problems, rising Chinese inflation and the future of Federal Reserve monetary policy.

Inter-Korean tensions have soared since the North attacked the front-line island of Yeonpyeong on Nov. 23 with a barrage of artillery, killing four people, causing physical destruction, forcing residents to evacuate for the mainland and pushing South Korea to bolster its defense readiness.

But President Lee Myung-bak said last week during a trip to Malaysia that North Koreans were increasingly aware that South Korean citizens are better off. “Reunification is drawing near,” he said, though provided little in the way of elaboration.

Bank of Korea Gov. Kim Choong-soo said that the remark has highlighted that policymakers should be ready for any eventuality.

“It was a comment aimed at awakening those in charge of all government agencies to always be ready and that they must prepare for any possibility,” Kim told reporters Monday. He did not elaborate.

South Koreans generally aspire for unification with the North, though worry about the potential cost and what effect that could have on their own economy, financial markets and standard of living.

The economic gap between the two countries is wide.

South Korea’s gross domestic product, a measure of the value of all goods and services produced in the country, stood at $832.9 billion in 2009, according to the central bank.

The bank estimates that North’s economy last year was valued at 28.6 trillion South Korean won, or $25 billion at current exchange rates. Despite its impoverishment, the country has active nuclear and missile programs and a national policy of giving precedence to its military.

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Associated Press writer Seulki Kim contributed to this report.

This news, SKorea: Economy could grow 5 percent in 2011
(AP)
extract from US Economy

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