Major foreign investment banks are expecting South Korea’s economic growth to remain in the mid-2 percent range for this year on faltering exports, a report showed Sunday.

Ten foreign investment banks forecast the Korean economy togrow an average of 2.6 percent this year, according to a report by the Korea Center for International Finance.

Their forecast stood in contrast with the central Bank of Korea’s 3 percent growth estimate and the government’s 3.3 percent projection.

The prolonged eurozone debt crisis and China’s slowing economy are dampening the prospects of the export-dependent Korean economy. Many analysts have forecast the Korean economy to grow in the 2-percent range this year.

The South Korean economy grew 0.3 percent in the second quarter from three months earlier, a third of the 0.9 percent on-quarter expansion in the first quarter, spawning concerns that the country’s economic momentum is weakening.

In the first half, Asia’s fourth-largest economy grew 2.6 percent from a year earlier.

BNP Paribas put the lowest growth estimate for South Korea at 2 percent for the year, with BoA Merrill Lynch forecasting 3 percent growth.

The growth estimates offered by the remaining eight investment banks range from 2.3 percent to 2.8 percent, according to the report.

Recent exports data are fueling concerns that the Korean economy may not fare well in the current quarter. Exports fell 1.8 percent on-year to an estimated $45.66 billion last month. Exports in August dropped 6.2 percent on-year, following an 8.8 percent plunge in the previous month.

South Korea’s central bank unexpectedly froze the key interest rate at 3 percent for the second straight month last month in an apparent bid to save ammunition for any worsening of economic conditions at home and abroad.

The BOK froze the key rate last month after delivering a surprise cut in July in a bid to cushion the bitter impact of the eurozone debt crisis on the local economy.

But the slowing growth outlook and easing price pressure are prompting analysts to bet on an additional rate cut by the country’s central bank within this year.
 

(Yonhap News)