Business news for Mon, 24 Dec 2007 & with words economy+government. 3 news.

SOUTH Korea's consumer confidence declined from a five-year high, signaling spending may slow and crimp growth in Asia's fourth-largest economy. The sentiment index fell to 106 in the fourth quarter, the lowest in three quarters, from 112, the Bank of Korea said yesterday in a report in Seoul. A reading higher than 100 indicates optimists outnumber pessimists. The benchmark Kospi index of stocks has fallen eight percent from a November 1 record of 2,085.45 on concern US subprime-related losses would slow the global economy. Lehman Brothers Holdings Inc this month cut its 2008 growth forecast for South Korea to 4.6 percent from 4.7 percent, Bloomberg News reported. "Consumers were probably very worried by the US subprime crisis," said Lee Sung Kwon, an economist at Good Morning Shinhan Securities Co in Seoul. The yield on a five-year government bond rose two basis points to 5.87 percent in Seoul and the won gained 0.1 percent to 939.65 versus the dollar. The

SRI Lanka's central bank will probably keep its benchmark interest rate unchanged at the highest level in Asia in a bid to contain inflation without threatening economic growth. Central Bank of Sri Lanka Governor Nivard Cabraal will leave the repurchase rate at 10.5 percent for a 10th straight meeting, according to nine of 11 analysts surveyed by Bloomberg News. Two expect a half point increase. The decision is due tomorrow in Colombo. The central bank forecasts the economy will next year expand between seven percent and 7.5 percent, the fastest pace in 30 years, as the government spends money to rebuild the eastern region captured from Tamil Tiger rebels in July. Cabraal said last month that borrowing costs at a five-year high were sufficient to bring inflation below 10 percent next year from about 20 percent now. "The central bank will look to fuel growth as much as possible," said Geeth Balasuriya, an analyst at HNB Stockbrokers Pvt in Colombo. "Although

JAPAN'S Cabinet approved a budget that includes increased spending on rural areas and social welfare, making it harder for Prime Minister Yasuo Fukuda to balance the books by 2011. Japan's deficit is set to widen for the first time in five years and spending will rise 0.2 percent to 83.1 trillion yen (US$732 billion) in the year starting on April 1, according to a budget proposal released in Tokyo, Bloomberg News reported. Fukuda may struggle to meet his deadline as cooling global growth dims the outlook for Japan's export-dependent economy. The ruling Liberal Democratic Party is under pressure to assist ailing regions and elderly voters after it lost control of the upper house in July, making it difficult for it to cut debt. "The current political situation is forcing Fukuda to spend more," said Hidenori Suezawa, chief strategist at Daiwa Securities SMBC Co in Tokyo. "Given that the nation's public debt is rising, the government needs to make drastic reforms in