Korea's economic growth will likely lose steam in 2012 due to the lingering European debt crisis and a slowdown in the U.S. and Chinese economies, a think tank said Wednesday.
The Korea Economic Research Institute (KERI) revised down the growth forecast of Asia's fourth-largest economy for this year to 2.6 percent from the previous 3.2 percent.
The think tank said that the slowing Chinese economy will weigh heavily on Korea's exports in the midst of prolonged debt problems in Europe and a delayed recovery of the U.S. economy.
However, it forecast that the trade surplus will expand to $30.3 billion won this year, thanks to a decline in imports and an improvement in its service account. The think tank earlier expected the country's trade surplus for 2012 to reach $15.9 billion.
Consumer prices will grow a modest 2.6 percent by the end of 2012, down 0.5 percentage points from its earlier forecast of 3.1 percent.
The local currency is expected to hover around 1,140 won against the U.S. dollar in the remaining year in accordance with the development of the financial crisis in Europe, said KERI.
The think tank noted that South Korea may face deflation due to rising household debts, a drop in property value and a prolonged economic slump, calling for timely appropriate measures to prevent it. (Yonhap)