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Tue, Sep 30, 2003 - Page 12 News List

South Korea relaxes rules for credit card companies

AFP , SEOUL

South Korea eased consumer credit card rules yesterday in an effort to boost the recession-hit economy as official indicators showed industrial activity remains sluggish.

Finance ministry officials said the government had eased restrictions on credit card firms allowing them to extend the maturity of loans while putting off next year's deadline to bring their cash advances into line with assets.

Domestic consumption drove South Korea's economic growth last year, promoted by easy credit that left a massive consumer debt hangover.

This year, credit-tightening measures have produced a credit crunch that helped nudge the economy into recession.

The hoped-for recovery has been a long time in coming but industrial output figures for last month showing 1.5 percent growth from a year ago were viewed as positive despite falling below market expectations.

The figure compared unfavorably with to last year's annual rate of eight percent but was up on the 0.7 percent rate seen in July, according to the National Statistical Office (NSO).

Industrial output rose on strong semiconductor and telecom equipment production and smaller losses from strikes at automobile companies, according to the NSO.

Output increased a seasonally-adjusted 3.4 percent month-to-month, the biggest gain since January last year.

"Semiconductor and telecom sector output expanded, resulting in firmer output activity, while consumption and plant investment remained sluggish," the NSO said.

Wholesale and retail sales, taken together, fell 2.7 percent last month from last year, the sixth straight drop, while wholesale sales showed signs of a rise.

"The August output data are positive enough to rekindle hopes of economic recovery in the fourth quarter," said Daewoo Securities economist Yi Hyo-Keun, predicting that exports would remain strong and consumption and investment would gradually recover.

Government officials cautioned, however, that output has yet to reach the level required to sustained a projected growth rate of three percent for this year.

Meanwhile, South Korea's current account posted a surplus for a fourth straight month last month, when it widened to US$1.39 billion from US$425.9 million in July, the Bank of Korea said.

The central bank, in a preliminary report, attributed the increase to increased merchandise trade surpluses and narrower service account shortfalls.

The merchandise trade surplus rose to US$2.37 billion last month from US$1.57 billion in July, with exports falling to US$15.59 billion from US$16.01 billion a month earlier, with imports declining to US$13.22 billion from US$14.44 billion.

At the same time, the country's index of leading indicators, the key gauge measuring the economic outlook, posted positive growth for a third straight month last month, rising 0.6 percentage points from a month earlier after a gain of 0.1 percentage points in July.

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