POLL-S.Korea Sept export drop seen easing, inflation picking up

* What: Aug industrial output; Sept trade and CPI

* When: Output at 0430 GMT Sept 30; trade at 0100 GMT Oct 1;

CPI at 0430 Oct 1

* Export fall seen halved to the slowest since Oct

* Factory output stalled; inflation picking up

SEOUL, Sept 28 - South Korean exports in September likely fell an annual 10.4 percent, their smallest decline in 11 months, while inflation picked up, adding pressure on policymakers to begin unwinding economic stimulus measures, a Reuters poll showed on Monday.

Industrial output growth, however, likely stalled in August, the poll showed. The various data will be releaed on Wednesday and Thursday.

"Exports will likely turn to growth in the fourth quarter as the global economy is recovering and the won's rise against the dollar is less steeper than that of the yen, helping local firms keep some of their competitive edge," said Song Jae-hyeok, an economist at SK Securities.

"I believe that the economic conditions will likely ripen enough for a rate hike this year," he said.

South Korea will keep its loose fiscal policy until the middle of next year by which time the economy should have recovered, the finance ministry said on Monday, in contrast to the central bank's more hawkish policy stance.

The government's cautious approach is at odds with the central bank which has repeatedly signalled said it is ready to raise interest raises, possibly before the end of the year, to calm a booming property market and other inflationary pressures.

Exports from Asia's fourth-largest economy in September likely fell by half as much as a revised annual drop of 20.9 percent in August, according to the median forecast of 10 analysts. The expected drop of 10.4 percent would be the smallest decline since October 2008, reflecting global demand is slowly picking up.

South Korean exports began to tumble last November, hit hard by the worst global downturn in many decades, and saw double-digit annual declines since then.

Imports are expected to have fallen 26.5 percent in September from a year earlier, after a revised 32.6 percent drop in August, bringing about a trade surplus of $4.49 billion.

South Korea is the first major exporting economy in the region to report monthly trade figures and they will be closely followed by investors for clues on world demand.

Many economists fear consumption could fall again in coming months as the impact of massive fiscal and monetary stimulus fades, while the same easy money policies risk fueling inflation.

Consumer prices likely rose an annual 2.4 percent in September from 2.2 percent in August, accelerating further from a 9-year low in July, the poll showed.

"A fast economic recovery could threaten price stability. Inflation could emerge as a major policy priority later this year or early next year," Song at SK Securities said.

Industrial output in August is estimated to have fallen by a seasonally adjusted 0.1 percent from July, reversing seven straight months of gains, but rose 2.0 percent from a year earlier, according to the poll.

"The sluggish output figure for August is just temporary. Given strong consumer and business confidence data and other positive indicators, the recovery trends will resume again," said Kim Jong-su, an economist at NH Investment & Securities.

The Bank of Korea held its policy interest rate steady at record-low 2.0 percent for a seventh consecutive month in early September but hinted at an rate hike looming to prickle the property bubble. It next reviews rates on Oct. 9.

Forecasts for South Korea's August industrial production (percent change from):

PREV MONTH* YEAR EARLIER Number of forecasts 10 11 Median -0.1 2.0 Low -2.5 -0.9 High 1.5 3.6 - - - -

Forecasts for South Korea's September exports and imports (percent change from year earlier):

EXPORTS IMPORTS Number of forecasts 10 10 Median -10.4 -26.5 Low -16.0 -30.9 High -3.0 -24.4 - - - -

Forecasts for South Korea's September consumer price index (percent change):

PREV MONTH YEAR AGO Number of forecasts 9 11 Median 0.3 2.4 Low 0.1 2.2 High 0.5 2.6