South Koreans have been worried about the economy

The projected economic recovery comes after several years of slow growth.

The IMF said that rising global growth will boost Korea's exports to the USA.

But it urges the South Korean government to continue with corporate reforms aimed at curbing the power of the chaebols, the giant conglomerates.

Korea also facing a big budget deficit.

Optimism

The International Monetary Fund is projecting growth of 5.5% in 2005.

The estimates are slightly below those of the Korean Finance Ministry, which is expecting 5% growth next year, and nearly 6% in 2005.

"All around the world, the global economy has been picking up. This rising tide will lift Korea as well," said the IMF's Joshua Felman after consulting with Korean officials.

Mr Felman also indicated that, although the IMF wanted Korea to eliminate its budget deficit, "it would be unwise to tighten in 2004 as this could undermine the recovery, which is still in a very early stage."

The IMF also wants to maintain the momentum of corporate reform, and urged a quick sell-off of government holdings in three big investment trusts which had been the subject of a rescue plan.

Gloom

Any recovery will be welcome in Korea, which has suffered five years of sub-par growth after the Asian crisis of 1997-98, which led to the largest bail-out ever by the IMF.

Figures released last month indicated that consumer confidence was at its lowest ebb for almost five years.

According to these consumer sentiment figures, South Koreans have now been negative about future prospects for more than a year.

The index measuring current feelings about the state of the economy fell to 59.9 in September from 63.9 in August, marking its worst level since November 1998.

And so far Korea has consistently missed government growth targets.

Slowdown

The Bank of Korea has recently warned that the economy was still in some difficulty.

Slowing consumer spending combined with weaker than expected investment, it said, means that growth for the fourth quarter of this year is likely to miss the 3.8% annualised rate it had hoped for.

As a result, "The full-year growth will probably fall below 3%," the bank said in a statement.

"The domestic economy has not found any particular momentum for recovery as yet."

The mood among South Koreans may well stay fragile for some time thanks to political turmoil.