WRAPUP 2-South Korea c.bank rushes to give banks more help

* Central bank hold emergency meeting, to boost liquidity

* Presidential adviser sees no value in FX intervention

* Presidential adviser accepts 2009 growth to hit decade low

* Forex reserves in November drop to near four-year low (Recasts with central bank announcement)

By Cheon Jong-woo and Seo Eun-kyung

SEOUL, Dec 3 (Reuters) - South Korea's central bank promised at an emergency meeting on Wednesday to pump more funds into its cash-short financial system, as a top official accepted the economy is heading for much lower-than-expected growth in 2009.

The president's top economic adviser concurred with increasingly gloomy economic forecasts that growth in 2009 would be its weakest since the Asian financial crisis a decade ago and said it was pointless to squander the country's falling foreign exchange reserves to try to lift the weak won .

The comments followed news that currency reserves dropped to a near 4-year low in November, increasing pressure on the central bank to do more to help lift Asia's fourth-biggest economy as it confronts a global crisis that has already tipped some of its top export customers, including the United States, Japan and the euro zone, into recession.

"The presidential secretary is trying to pressure the central bank for more drastic action by highlighting a bleak economic outlook," said Kong Dong-rak, a fixed-income analyst at Hana Daetoo Securities.

The central bank's monetary policy committee agreed to provide additional support for financial institutions, including paying interest on local bank cash reserves totalling about 500 billion won ($341.8 million).

It will also purchase more bonds from local banks and actively supply liquidity to stabilise markets. [nSEW000024].

"These measures are aimed at reinforcing banks' lending capability," the central bank said in a statement.

But it made no mention of interest rates, which it has cut three times since the global crisis took a turn for the worse in September with the collapse of Lehman Brothers investment bank.

Still, financial markets expect the central bank to cut its base rate, currently a two-year low of 4.0 percent after cuts amounting to 1.25 percentage point since Oct. 9, at its next monthly rate review on Dec. 11.

WEAKER GROWTH

"Overall, there is a consensus forecast for growth of some 2-3 percent (next year). I do not disagree with that," senior presidential economic secretary, Bahk Byoung-won, told reporters.

The government is expected later this month to revise its 4 percent economic growth forecast for next year. GDP growth this year is expected to be 4.7 percent.

Growth of 2-3 percent would be the lowest since 1998, when the economy contracted 6.9 percent at the height of the Asian financial crisis.

In fact, some investment banks have predicted the economy will shrink in 2009 as much as 3 percent as the global recession drains export demand, long the country's main growth driver, and as domestic demand wilts.

Exports last month fell more than 18 percent, their biggest drop in seven years, with one official saying the economy was slowing more than expected.

Reserves last month dropped $11.7 billion, hitting their lowest in almost four years at $200.5 billion and following on from a record $27.4 billion decline in October.

NOT ENOUGH TO HELP

Even though Korea's reserves were the world's sixth largest at the end of October, Bahk said that they were not big enough to lift the won which has lost nearly 40 percent of its value this year against the dollar.

"South Korea does not have enough capacity for massive forex intervention. We will carry out smoothing operations in forex markets when necessary," presidential adviser Bahk said.

Since the Asian financial crisis, Asia countries have built up massive foreign exchange reserves to protect themselves against capital flight. Asian reserves are around $4 trillion.

But confidence in the cash pile has been severely tested by the global crisis. Worry that the nation's foreign exchange reserves might dip below $200 billion have been fanning investor concerns over a fresh currency crisis.

The government and central bank have been forced to pump foreign currency into the financial system after banks suddenly found themselves unable to raise dollars through normal banking channels as global credit conditions tightened.

South Korean banks have looked especially vulnerable to the crisis partly due to their high level of short-term foreign currency loans used to fund the country's exporters.

"The foreign exchange authorities steadily injected foreign currency liquidity to ease uncertainty in the local foreign currency money market due to a persistent global credit crunch," the Bank of Korea said.

Officials said they did not expect reserves to fall much further, a prediction echoed by a number of analysts, given an improvement in the current account, a $30 billion dollar credit line at the U.S. Federal Reserves and liquidity injections by other central banks. (Writing by Jonathan Thatcher; Editing By Keiron Henderson)