Seoul  - Industrial production in South Korea fell in December to its lowest level since the government started collecting such data in 1970 as the country's economy headed further toward recession, the National Statistical Office said Friday.

Owing to shrinking demand at home and abroad, production in the mining and manufacturing sectors fell 18.8 per cent in December after a 14-per-cent drop in November as a number of Korean companies have cut production in the wake of the global economic downturn.

Economists said the slowdown in South Korea's economy seems to be accelerating with the second-straight monthly decline in production. They predicted an economic contraction of 1 per cent to 3 per cent in the first half of the year.

It was almost certain that South Korea's economy would shrink in that time frame if there was no significant improvement in the business environment, central bank chief Lee Seong Tae said.

South Korea, which is strongly dependent on exports, has been hit hard by the world economic downturn. Exports of goods by Asia's fourth-largest economy fell by 11.9 per cent in the fourth quarter, the strongest decline since 1979.

South Korea's economy contracted at a more-than-expected rate of 5.6 per cent in the final quarter of 2008 - its biggest drop since the Asian financial crisis a decade ago.

The fall in the country's gross domestic product (GDP) from the quarter before contrasted with a 0.5-per-cent rise in the third quarter. On a year-on-year basis, the fourth-quarter fall was 3.4 per cent as the global economic crisis gripped South Korea, the Bank of Korea said.

For all of 2008, South Korea's economy expanded 2.5 per cent, down from 5-per-cent growth in 2007, the central bank said. (dpa)