According to the Korea Automobile Manufacturers Association (KAMA), production should increase to 3.15m cars - a rise of 3.7%.

The country's car manufacturers are expected to benefit from an increase in global demand for cheaper cars, as the economic downturn causes people to tighten their purse strings.

The association also says demand will be helped by lower excise taxes and next year's World Cup Soccer finals.

The survey predicts that total car sales in South Korea will increase by 4.2% to 1.5m.

Exports to rise

KAMA expects Korean cars sales to increase not only in the domestic market but also overseas.

The country is estimated to export 1.63m cars in 2002, a rise of 3.2%.

Exports of Korea's smaller cars are expected to do particularly well, as the global economic slowdown sparks interest in cheaper vehicles.

Korean car exports depend hugely on the US market which accounts for 34% of Korean vehicle exports by volume, and 38% of exports by value.

Exports to North America are expected to rise by 6.3% to 760,000 vehicles next year, while shipments to Europe should grow by 6.8% to 510,000.

About 110,000 cars are forecast to be exported to the rest of the Asia-Pacific region, up 2.8% from this year.

Two leaders

Another factor behind the increase in production is expected to be a revival in fortunes at Daewoo thanks to its deal with the American car giant General Motors.