SEOUL, Aug 20: South Korea's economy, which posted higher-than-expected growth in the second quarter, is expected to fare even better in the second half led by robust exports, economists said on Wednesday.

However, a string of corporate failures and a lack of public confidence in the economy would continue to discourage private consumption and investment, they said.

Gross domestic product, which measures the total value of goods and services produced by an economy excluding income from abroad, grew a real 6.3 per cent in the second quarter of 1997, compared to a 6.9-per cent rise a year earlier.

The central Bank of Korea said a sharp rise in exports was behind the unexpectedly strong GDP figure. Sluggish private consumption and fixed capital investment kept GDP growth from expanding even further, the central bank said.

"The economic growth in the second quarter is higher than expected, which implies exports recovered faster than anticipated," said Lee Jung-ja, head of research at HSBC James Capel Securities.

"We believe exports will continue to contribute heavily to the overall growth," she said.

The central bank said second-quarter exports of goods and services rose 24.0 per cent year-on-year, compared with 10.0 per cent a year ago.Imports rose 7.3 per cent against 12.5 per cent a year ago.

A rise in overseas shipments of heavy industrial goods such as petrochemical, electric and electronic products was a major factor behind the export rise.

"We expect stronger economic growth in the second half of 6.5 per cent," said Song Tae-jung, an economist at LG Economic Research Institute.The GDP grew 5.9 per cent in the first half of this year, compared with a 7.3 per cent rise a year before.

The central bank earlier said it had targeted 6.0 per cent GDP growth for the whole year against a 7.1-per cent rise a year earlier.

"Traditionally, strong exports have always initiated the nation's economic recovery and it will again be the case," said Song.

Manufacturing production rose 7.6 per cent in the second quarter on healthy output growth of heavy industrial and chemical goods. But slowing output of light-industrial products capped the growth.

Fixed capital investment during the period fell 0.1 per cent versus a 5.2-per cent rise a year before due to sluggish facilities and construction investments."We expect an ongoing slowdown in facility investment due to a poor corporate environment and the currency crisis in Southeast Asia, which is one of our export markets," said Jeon Tae-woong, senior deputy director of the statistics department at the central bank.

Economists said companies were cutting back on their investment plans, pressured by corporate financial troubles and rising borrowing costs.Growth in private consumption slowed to 4.8 per cent in the second quarter against a 7.4-per cent rise a year ago. The central bank blamed the sluggishness on the country's corporate troubles and a slowdown in income growth."More and more people are feeling insecure over their jobs asthe business climate deteriorates, which will continue to bear down on private consumption," said Lee of James Capel.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.