South Korea's economy may fall into recession as domestic demand and exports are sharply declining amid global economic downturn, a state-run think tank said on Wednesday.

"The possibility of a recession is running high as domestic demand and exports fall sharply," the Korea Development Institute (KDI) said in a monthly report.

The shrinking industrial production, consumer spending, investment and exports were contributed for the possible recession.

According to the report, industrial production plunged to an all-time low in November, with output contracting 14.1 percent from a year earlier. Consumer goods sales contracted 5.9 percent over the same period as people scaled down spending on high-priced durable goods for fear of worsening economic conditions. Equipment investment plunged 19.4 percent in November from a year earlier.

In November, overseas sales contracted on-year 17.4 percent, while imports plunged 21.5 percent over the same period mainly due to falling prices of oil and raw materials, it added.

The KDI said that the domestic financial markets appear to be gaining stability "gradually" thanks to additional currency swap lines and the central bank's aggressive moves to lower interest rates.

The global economy will show an "overall downturn" as economic recession deepens in major developed countries, it added.　

(Xinhua News Agency January 7, 2009)