SEOUL (AFP) - South Korea's export-dominated economy suffered its sharpest-ever fall in industrial output in January, figures released Monday showed, but a healthy trade surplus for February relieved some of the gloom. Production in mining and manufacturing shrank 25.6 percent year-on-year compared with a revised 18.7pc year-on-year decline in December, the National Statistical Office (NSO) said. The January contraction is the biggest since such data began being compiled in January 1970, adding to fears the nation is slipping into recession faster than expected. "The data reflects a continued economic downturn in January," NSO official Yoon Myung-Jun told reporters, attributing the decline to reduced production of semiconductors, chip parts and cars. Fewer working days in January due to the Lunar New Year holidays also contributed to the poor figures, he said. Recent indicators suggest Asia's fourth-largest economy is heading for its first recession in 11 years amid the global economic downturn. Exports in January plunged by a record 33.8 percent year-on-year, leaving a trade shortfall of 3.35 billion dollars. But the country posted a surplus of 3.3 billion dollars in February, the largest monthly gain since July 2007. Exports fell 17.1 percent year-on-year to 25.8 billion in February but imports nosedived 30.9 percent to 22.5 billion dollars. The Ministry of Knowledge Economy attributed the turnaround to a sharp drop in imports and a surge in ship exports. Favourable exchange rates and more working days also helped the balance of trade swing back into the black. Exports of steel, petrochemicals, cars, auto parts, consumer electronics, semiconductors and computers posted negative growth in February, but exports of ships - which are ordered years in advance - soared by 47.4 percent. Lee Dong-Geun, head of the ministry's trade investment office, forecast that if imports continued to fall off, the country would achieve monthly surpluses this year. His office forecast an overall trade surplus of at least 20 billion dollars for 2009. But Daniel Melser, senior economist with Moody's, said the strong trade figure in February was partly a consequence of Lunar New Year holidays - which fell in January this year compared with February in 2008. "The key takeaway from February's numbers is that the data continues to show massive declines in exports, as well as imports, heralding the worst period for manufacturing in many years," he said in a commentary. South Korea faces "a secular decline in overseas demand" for the rest of this year, he said, referring to its heavy export dependence on expensive durable goods such as cars, televisions and computers. "Consumer and investment demand in the US, Europe and elsewhere has collapsed for these types of items as the economic environment has worsened and the outlook has darkened," Melser said. "Exports will fall by double-digit rates on a real annualised basis over the course of 2009. This will see a major contraction in the manufacturing sector and the economy as a whole," he said.