S. Korean economy faces mild slump

SEOUL, Sept. 4 (UPI) -- South Korean exports are enjoying growth but the country's economy is faced with weak domestic spending, the central bank said Thursday.

In a report to the national assembly, the Bank of Korea said the economy could remain in a "mild" slump.

The report blamed weakness in both domestic consumption and corporate investment on high inflation, but noted exports are likely to post modest growth on solid demand from emerging markets, Yonhap news service reported.

The bank said employment remains weak due to slumping domestic consumption.

August inflation slowed to 5.6 percent, but the rate was still much higher than the bank's target range of 2.5 to 3.5 percent.

Yonhap quoted some experts as saying the bank may raise interest rates again this month because the sharp deprecation of the won against the U.S. dollar tends to stoke inflation.

South Korea's foreign exchange reserves, the sixth largest in the world, have been falling in the past five months, but bank head Lee Seong-tae was quoted as expressing satisfaction with the current reserves of $243.2 billion.