They said booming exports were set to stimulate long-protracted domestic consumption, boosting the world's 11th-largest economy back on track no later than the third quarter of the year.

But the hopes were dashed as consumers have tightened their purse strings throughout the country. Companies that enjoyed massive profits from brisk exports also remained wary of capital spending, citing uncertainty over the country's economic outlook.

The government was targeting economic growth of at least 5 percent this year, but officials admitted this month that they failed to achieve the target. The economy is expected to grow 4.7 percent in 2004, an improvement from 3.1 percent last year, but much lower than 7 percent growth in 2002. Previously the government had projected 5.2 percent growth for this year.

The economy achieved a solid 5.4-percent growth in the first half of the year, but it lost momentum in the second half as the booming exports failed to spark a wave of corporate investment and private consumption.

Many economists here attributed the poor performance this year to growing uncertainties in the business environment largely caused by political squabbling and mixed signals of policies by President Roh Moo-hyun, who was shifting from growth-oriented stance taken by his predecessors.

"Flagging local consumption is the main factor behind the poor-than-expected economic growth this year," said Lee Yoon-ho, head of the LG Economic Research Institute. "Lacks of political leadership and policy flip-flops mainly caused economic uncertainties that hurt private spending," he said.

The central Bank of Korea, which sets interest rates, and the Finance-Economy Ministry responsible for economic growth have been long divided over whether to seek growth or measures to control inflation at a time when more and more investors were losing confidence, analysts say.

Throughout this year, South Korea is suffering from a prolonged slump in domestic consumption, largely the result of a credit-card binge that blew up in 2003, leaving households with debts topping $50 billion.

Government surveys show that consumer sentiment is at four-year low in December and business sentiment has dropped to its worst in 16 months.

Private consumption dropped for the sixth consecutive quarter in the July-September period, declining 0.8 percent from a year ago. It fell 1.4 percent in the first quarter and 0.6 percent in the second quarter. The index is most likely to register minus growth in the fourth quarter. Domestic consumption is estimated to decline 0.9 percent for the full year, according to the BOK.

The growing credit card woes are another burden on the recovery of domestic consumption. LG Card Co. Ltd., South Korean second-biggest credit card firm, is facing a crisis of liquidation as former parent LG Group has rebuffed creditors' call for bailout, citing fear over falls in stock prices and investor confidence.

Analysts warn the possible liquidation of LG Card would cause another financial crisis in the country as the country is struggling with a sagging economy.

In January, LG Card, then the country's No.1 card issuer was pulled back from the brink of bankruptcy after creditors extended a rescue package. But it is still suffering from debts and losses totaling more than 1 trillion won.

As many companies are reluctant to hire newcomers in the face of the economic doldrums, the unemployment rate aged 15 to 29 surged to 7.3 percent, compared with the total jobless rate of 3.3 percent in November, a blow to Roh who has declared job growth as his government's top economic priority this year.

In the first 11 months this year, a total of 426,625 people applied for unemployment benefits, the highest level since the 1997-1998 Asian financial crisis.

Surging exports have helped the country offset the two-year-long slump in domestic consumption, but have begun to lose steam late this year as global demand is slowing with soaring crude oil prices and sharply rising won against the U.S. dollar.

The country's accumulated annual exports reached the $200 billion mark for the first time in October on the back of strong shipments of chips and mobile phones. Minister of Commerce, Industry and Energy Lee Hee-beom said total exports could reach $250 billion by the year's end, up 29 percent from 2003 when the country shipped $194 billion worth of goods, the biggest annual increase since 1995.

But as exports have slowed down since late this year, South Korea's trade surplus is believed to have narrowed to $2.59 billion in December, from the $2.77 billion in November.

The Korea International Trade Association warns the country's trade surplus may shrink 30 percent in 2005 as exports decline as a result of the strengthening of the Korean won against the U.S. dollar. South Korea's currency has risen nearly 13 percent against the dollar this year, and its acceleration gained momentum in recent few months.

Critics say President Roh's left-leaning in economic policies have prevented the economy from emerging out of the long slump by hurting business climate in the country.

In a radical departure from his growth-hungry predecessors, Roh, a champion of the underprivileged as a self-made man born to peasant farmers, has made the fair distribution of wealth and the reform of big business conglomerates his top economic goals. The policy focus was considered by some media and businesses as meaning that the Roh administration is left leaning in economic philosophy.

Roh has taken a series of measures to overhaul the country's family-controlled business empire, known as chaebol.

The ruling party-controlled parliament passed a bill this month aimed at further limiting the power of owner families of big business conglomerates over individual affiliates. The revised fair trade law is aimed at reducing sharply the voting rights in affiliates by financial and insurance companies within the same business group.

The country was also swept this year by anti-foreign capital sentiment as South Korean investors believe many of the funds from abroad are speculative ones, frantically targeting management rights of local companies for short-term marginal gains.

The National Assembly committee passed revisions in December to the bill on securities transactions in a bid to help local companies fend off hostile takeover bid by foreign investors.

SK Corp. South Korea's largest oil refiner, barely kept its management control in the voting showdown last March with Monaco-based Sovereign Asset Management Ltd, But the refiner is bracing for another ownership battle in next March.