Korea's central bank on Thursday revised down its 2012 economic growth outlook to 2.4 percent as exports are feared to cool amid the eurozone debt crisis and China's slowing economy.
The Bank of Korea (BOK)'s revised outlook, the slowest expansion in three years, is down from its previous estimate of 3 percent made in July. The central bank's 2013 growth forecast was also lowered to 3.2 percent from 3.8 percent.
The growth outlook downgrade gave weight to the BOK's Thursday decision to slash the key interest rate to 2.75 percent, the second rate cut this year.
Asia's fourth-largest economy is losing steam on falling exports and sluggish domestic demand, raising concerns South Korea may be entering a phase of low growth trend.
The BOK's outlook downgrade was widely expected as international organizations and local think tanks scurried to lower their growth forecasts for the local economy to the 2-percent range.
"The quarterly growth is likely to hover below 1 percent every quarter until the first half of next year," the central bank said in a statement.
Citing the delayed economic recovery, the BOK also lowered its 2012 consumer inflation forecast to 2.3 percent from its previous estimate of 2.7 percent. The bank's 2013 inflation outlook was also lowered to 2.7 percent from 2.9 percent.
The BOK reduced its inflation target range for 2013-2015 in a bid to reflect the recent trend of stabilizing inflation and to stress its willingness to focus on price stability.
The central bank said it plans to aim to keep the inflation target band between 2.5 and 3.5 percent for the next three years, narrower than the current 2-4 percent range for 2010-2012.
According to the BOK, exports, which account for about 50 percent of the Korean economy, are forecast to expand 3.4 percent this year, down from a previous estimate of 4.4 percent. Private spending will likely grow 1.7 percent this year, compared with an earlier 2.2 percent growth projection.
Construction investment is expected to gain 0.2 percent this year, sharply decelerating from a 1.6 percent estimate. Facility investment is likely to advance 1.5 percent, also lower than the previous forecast of 5.8 percent.
The central bank also raised its 2012 forecast of the current account surplus to $34 billion from its previous estimate of $20 billion as trade gaps will remain in the black and the service account is expected to improve. (Yonhap)