South Korea’s central bank yesterday cut the nation’s economic growth forecast for this year to 3.5 percent, citing a global slowdown including waning demand from debt-hit Europe.
GDP in Asia’s fourth-largest economy would expand 3.5 percent this year, lower than the 3.7 percent estimated in December last year, the Bank of Korea (BOK) said in its revised economic outlook report for this year. South Korea’s GDP grew 3.6 percent last year.
“The recent easing of uncertainties on Europe’s debt problems is a positive factor, but downward revisions of global economies and rising oil prices are overshadowing such positive factors,” the BOK said in a statement.
Exports of goods will increase 4.8 percent this year, slower than the earlier forecast of 5 percent, due to weak demand from the EU — the nation’s second-largest trading partner — the BOK said.
Overseas sales of goods, which account for nearly 90 percent of total exports, rose 10.5 percent last year from 2010, it said.
The current account surplus will reach US$14.5 billion this year, higher than the December forecast of US$13 billion, but far lower than the US$26.5 billion posted last year, it said.
The account is the broadest measure of trade with the world. Slower growth will likely leave inflation within the central bank’s target range of between 2 percent and 4 percent, with consumer prices expected to rise 3.2 percent this year, compared with 4 percent last year, it said.
The bank last week left a key interest rate unchanged at 3.25 percent for a 10th consecutive month, citing external -uncertainties. Woori Investment & Securities analyst Peter Park told Dow Jones Newswires that the central bank’s revised figure was still too optimistic.
“The BOK’s assessment of the economy is still too bullish and fails to reflect recent developments in the eurozone, including the resurfacing of Spain’s debt troubles,” he said.
“If the situation in Europe turns for the worse, the central bank will have to make further downward revisions to its outlook,” Park said.