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BOK head cuts economic growth forecast up to 2012

The South Korean economy is likely to grow at a slower pace than the central bank’s earlier forecast of 4.3 percent this year amid dimmer global economic outlooks, its chief said Friday.

“The growth of the South Korean economy is expected to be lower than 4.3 percent this year, but it will be higher than 4 percent,” Bank of Korea Gov. Kim Choong-soo told lawmakers.

Kim said the economic growth in the third quarter seemed to be “not that high.” The BOK earlier said that the quarterly growth would reach around 1.5 percent in the third and fourth quarter, respectively.

The governor also revised down the growth outlook for next year, adding that the Korean economy is expected to grow at the low-4 percent range for 2012, slowing from the bank’s previous estimate of 4.6 percent.

Finance Minister Bahk Jae-wan cast a similar view, saying that growing downside risks are likely to cause the economy to grow below 4.5 percent for next year. The government said in June that the economy will likely grow at the upper 4 percent range in 2012 after expanding around 4.5 percent this year.

Gov. Kim said earlier that if global financial jitters and economic slowdowns in advanced countries persist, the growth of the Korean economy will likely be affected by a considerable margin.

He told lawmakers last week that downward risks are viewed as being predominant due to a sputtering growth in the U.S. economy and the spread of the eurozone sovereign debt problems.

Gloomier global economic prospects are feared to dent Korea’s exports, which account for about 50 percent of the economic output.

The Korean economy grew 0.9 percent on-quarter in the second quarter, slowing from a 1.3 percent expansion in the first quarter.

BOK policymakers are in limbo in juggling between slowing economic growth and high inflation. The BOK will not be able to evade fierce criticism from the public about its failure to tame inflation this year, experts say.

Consumer prices rose for the ninth straight month in September, topping the upper ceiling of the BOK’s 2-4 percent inflation target band.

But the central bank said in its monetary policy report that it plans to take a cautious approach to managing its rate policy by considering risk factors at home and abroad, spawning speculation that there will be no rate hike for the remainder of the year.

The BOK froze the key rate at 3.25 percent for the third consecutive month in September on dimmer global economic outlooks. 

(Yonhap News)