Seoul - South Korea's economic output will contract by 4 per cent in 2009, according to a prognosis Tuesday by the International Monetary Fund (IMF).

The organization significantly corrected downwards a forecast of 2-per-cent growth for Asia's fourth-largest economy.

The main reasons for the sharp decline were steep falls in exports and domestic demand following the world-wide downturn, the South Korean Finance Ministry said.

However, the IMF predicted 4.2-per-cent growth for 2010 amid a global upswing, with South Korea's economy to show the first signs of recovery already in the second quarter of 2009, and complete recovery in the second half of the year.

The country is heading for the first recession since the Asian crisis more than 10 years ago. South Korea's gross domestic product fell by 6.9 per cent in 1998. In the last quarter of 2008, the export-dependent country's GDP contracted by 5.6 per cent compared with the previous quarter.

Year-on-year, the GDP fell 3.4 per cent. (dpa)