The South Korean economy is expected to grow 3.1 percent this year amid weak demand at home and abroad and the country's central bank may conduct another rate cut to shore up the sagging economy, HSBC Holdings Plc. forecast Wednesday.

The latest growth forecast for Asia's fourth-largest economy by the Hong Kong-based global financial giant is the same as its estimate made in late March and in November last year.

In a press briefing in Seoul, Frederic Neumann, co-head of HSBC's Asian economics research said South Korea lacks growth momentum as its export-driven economy may lag behind its gross domestic product target due to slow recovery in major economies, including Europe and China.

Even if South Korea's central bank further lowers the base rate and the finance ministry steps up stimulus measures later this year, it would have a limited impact on domestic consumption as households feel pinched by rising debts, Neumann said.

The Bank of Korea cut the key rate to a record low of

1.75 percent in March and held it steady for April.

(South Korea has) "no choice but to cut interest rates again, and we think the Bank of Korea will cut interests at least one more time in the third quarter, and the government may add fiscal stimulus packages with supplementary budget this year as well," Neumann said.

HSBC's projection is the same as the BOK's outlook, which recently lowered from 3.4 percent to 3.1 percent. The latest BOK forecast hovers far below the finance ministry's 3.8 percent prediction.

On Tuesday, the International Monetary Fund also lowered South Korea's economic outlook to 3.3 percent from an earlier 3.7 percent, citing weakened recovery momentum.

Neumann said there is not much room for individuals to increase their spending even after another rate cut, noting companies should spend their excess cash reserves in wages and dividends to boost the domestic economy and the equity market. (Yonhap)