By Cheon Jong-woo
SEOUL, Nov 22 (Reuters) - South Korea's top state-run research agency called on the authorities on Sunday to gradually exit from emergency policy measures, predicting the economy would grow in 2010 at its fastest pace in eight years.
The Korea Development Institute (KDI) forecast Asia's fourth-largest economy would expand by 5.5 percent, the fastest since a 7.2 percent jump in 2002 and the highest forecast so far by major local and international agencies.
'Regarding future monetary policy, it is desirable to gradually normalise the trend of low interest rates, given the economic situation at home and abroad and potential side effects which the economy can face if the current expansionary policy trend continues in the long term,' it said in a second-half economic forecast report.
The authorities need to enact monetary and financial policy that will prevent a rise in money supply from creating an asset bubble and inflation, it added.
The central bank will likely raise interest rates in the first quarter of the next year, Kim Hyeon-wook, a fellow with KDI's macroeconomic and financial policy department, told reporters.
The Bank of Korea earlier this month dampened expectations that it was ready for an early increase in its policy rate from a record-low of 2.0 percent.
'Recently, stronger measures appeared to curb a rise in property prices. But policy effects from micro measures may weaken if the current expansionary policy continues in the long term,' the KDI said.
Apartment prices across the country were steady last week, ending 23 weeks of uninterrupted gains, while prices in the capital fell for the first time in eight months, a top local bank said on Friday.
HIGHEST GROWTH FORECAST
'The economic recovery is expected to be sustained for the time being as overall demand growth at home and abroad will lead to strong improvement in production and ease a slump in employment,' the KDI said.
On Thursday, the Organisation for Economic Cooperation and Development raised the country's economic growth forecast for 2010 to 4.4 percent from the previous 3.5 percent.
Top officials have said the economy would grow over 4 percent next year, with the President Lee Myung-bak forecasting about 4-5 percent growth in 2010.
Meanwhile, the KDI upgraded its economic forecast for this year to a 0.2 percent growth from the previous 0.7 percent contraction announced in September.
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((jongwoo.cheon@thomsonreuters.com; +82 2 3704 5665; Reuters Messaging;jongwoo.cheon.reuters.com@reuters.net)) Keywords: KOREA ECONOMY/ (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
SEOUL, Nov 22 (Reuters) - South Korea's top state-run research agency called on the authorities on Sunday to gradually exit from emergency policy measures, predicting the economy would grow in 2010 at its fastest pace in eight years.
The Korea Development Institute (KDI) forecast Asia's fourth-largest economy would expand by 5.5 percent, the fastest since a 7.2 percent jump in 2002 and the highest forecast so far by major local and international agencies.
'Regarding future monetary policy, it is desirable to gradually normalise the trend of low interest rates, given the economic situation at home and abroad and potential side effects which the economy can face if the current expansionary policy trend continues in the long term,' it said in a second-half economic forecast report.
The authorities need to enact monetary and financial policy that will prevent a rise in money supply from creating an asset bubble and inflation, it added.
The central bank will likely raise interest rates in the first quarter of the next year, Kim Hyeon-wook, a fellow with KDI's macroeconomic and financial policy department, told reporters.
The Bank of Korea earlier this month dampened expectations that it was ready for an early increase in its policy rate from a record-low of 2.0 percent.
'Recently, stronger measures appeared to curb a rise in property prices. But policy effects from micro measures may weaken if the current expansionary policy continues in the long term,' the KDI said.
Apartment prices across the country were steady last week, ending 23 weeks of uninterrupted gains, while prices in the capital fell for the first time in eight months, a top local bank said on Friday.
HIGHEST GROWTH FORECAST
'The economic recovery is expected to be sustained for the time being as overall demand growth at home and abroad will lead to strong improvement in production and ease a slump in employment,' the KDI said.
On Thursday, the Organisation for Economic Cooperation and Development raised the country's economic growth forecast for 2010 to 4.4 percent from the previous 3.5 percent.
Top officials have said the economy would grow over 4 percent next year, with the President Lee Myung-bak forecasting about 4-5 percent growth in 2010.
Meanwhile, the KDI upgraded its economic forecast for this year to a 0.2 percent growth from the previous 0.7 percent contraction announced in September.
* For related table, double-click
((jongwoo.cheon@thomsonreuters.com; +82 2 3704 5665; Reuters Messaging;jongwoo.cheon.reuters.com@reuters.net)) Keywords: KOREA ECONOMY/ (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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