RTTNews - The International Monetary Fund in a report published Sunday projected the South Korean economy to contract 1.75% in 2009, slower than its expectations of 3% drop for the year made in July.

Also, the IMF expects the growth momentum to moderate during the second half of this year, followed by a drawn-out recovery. As the impulse from the front-loaded fiscal stimulus and export gains from the steep depreciation of the won in early 2009 fade, the pickup in growth is unlikely to be sustained at the same pace, the lender noted.

For 2010, the IMF expects the economy to grow 2.5%.

The projection by the IMF are worse than the predictions made by the Bank of Korea in July. The Bank of Korea expected the economy to shrink 1.6% in 2009 but grow by 3.6% in 2010.

The IMF meanwhile also indicated that the there was a distinct possibility that weak global exports would weigh on South Korea's growth well beyond 2010, as Western consumers permanently increase their saving rates.

The other risks to the outlook included another bout of global risk aversion, and rising oil prices. However, the upside risk was a stronger impact from stimulus measures in South Korea and abroad, the IMF pointed out.

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