Korea’s economy is showing signs of recovery as various market indicators have shown improvements, the Ministry of Strategy and Finance said on Tuesday.

Asia’s fourth-largest economy saw its industrial production increase 1.8 percent in August this year from the month before, the highest growth in nine months.

Its housing data showed that apartment prices have been picking up over the last four weeks following the Aug. 28 follow-up measures aimed at revitalizing the real estate market.

Other data such as private investment and consumption also improved in August, while inflation and employment continued to show stability, the Finance Ministry’s economic report said.

In a meeting with economic-related ministers on Tuesday, Deputy Prime Minister and Finance Minister Hyun Oh-seok said that these improved indicators showed that Korea is recovering.

The Korean economy is showing a “differentiated appearance” from Asia’s emerging markets such as India where capital outflows triggered concerns over financial stability, whereas Korea is continuously seeing an inflow of foreign investment, Hyun added.

However, the deputy prime minister said Korea should not sit back, but further boost its monitoring of the financial markets as uncertainties concerning the U.S. economy remain.

"Some Korean companies could face difficulties due to a government shutdown in the U.S." Hyun said.

"We should further watch the markets closely and counter (any uncertainties) with stronger macroeconomic policies," he added.

The International Monetary Fund also said that Korea is set for a "modest recovery" backed by its fiscal and monetary stimulus.

It, however, revised down Korea’s 2014 growth forecast from 3.9 percent to 3.7 percent as weaker demand driven by China's slowdown and risk factors concerning the tapering of U.S. quantitative easing would weigh down Asia’s growth.

"Growth has disappointed across the (Asian) region, largely because of weaker demand,” said the IMF's World Economic Outlook report.

"Awareness of an approaching turning point in U.S. monetary policy, combined with slower growth momentum in many Asian economies, resulted in increased financial volatility in the region in recent months, with capital outflows in most countries,"

Korea’s 2013 growth forecast by the IMF remained unchanged at 2.8 percent.

China, Korea’s biggest trading partner, is projected to grow 7.6 percent this year, down 0.2 percentage point.

The IMF forecast that the world’s second largest economy is to grow 7.3 percent in 2014, down from its initial estimation of 7.7 percent.

The U.S.' 2013 growth has been revised down to 1.6 percent from 1.7 percent, and its 2014 growth from 2.7 percent to 2.6 percent.

By Park Hyong-ki (hkp@heraldcorp.com)