IMF Cuts South Korea Forecast

Recommends central bank raise interest rates early next year

SEOUL—South Korea's economy will grow more slowly than expected this year, but it has probably passed the worst and the central bank should begin raising interest rates from early next year, the IMF said on Thursday.

The Fund also said South Korea had room to boost domestic demand through fiscal stimulus, but said there is not necessarily a pressing need to change policy, in contrast to the market's view for a further interest rate cut as early as next month.

The International Monetary Fund forecast that Asia's fourth-largest economy would grow 3 per cent this year, slowing from a 3.6 per cent rise in 2011, and lower than the IMF's 3.25 per cent growth forecast from June.