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(LEAD) BOK slashes growth outlook to 2.7 pct

2016/07/14 13:57

(ATTN: UPDATES with additional details in paras 6-9, 12)

SEOUL, July 14 (Yonhap) -- South Korea's central bank on Thursday revised down its growth outlook for Asia's fourth-largest economy to 2.7 percent from 2.8 percent three months earlier, citing sluggish consumption at home and abroad.

The quarterly revision by the Bank of Korea (BOK) came shortly after the government slashed its outlook for 2016 to 2.8 percent from 3.1 percent.

"The local economy will maintain its modest growth trend on expansionary economic policies, but the bank believes local and external uncertainties surrounding the path to growth will remain high," BOK Gov. Lee Ju-yeol told a press briefing.

South Korea's exports have fallen every single month since the start of 2015, apparently forcing the central bank to twice slash its growth outlook to 2.8 percent in April and again to 2.7 percent this week from the initial 3 percent expansion offered at the start of the year.

Local spending, also a major growth engine here, gained only 0.9 percent on-year in the first six months of the year, falling far short of the bank's 2 percent target for the 2016-2018 period.

Still, the central bank said an increase in local spending will mostly support the overall economic growth this year, noting the local economy was expected to expand 2.4 percent on domestic consumption, while exports were expected to contribute only 0.3 percentage point to the overall expansion.

The bank said the local economy was expected to grow 2.4 percent in the second half of the year, following a 3 percent expansion in the first half.

"Although it rebounded substantially in the second quarter of 2016, private consumption is forecast to increase at a moderate pace in the second half. However, government measures, such as the tax cut for the replacement of old diesel cars, could contribute to boosting consumption," it said in a press release.

The bank also slashed its outlook for consumer price inflation to 1.1 percent from the 1.2 percent forecast three months earlier and the 1.4 percent one at the start of the year.

The BOK governor was scheduled to hold a special press conference later in the day to explain the bank's failure to meet its price inflation target.

The scheduled press conference comes under a self-imposed rule, under which the BOK governor is required to offer explanations for a deviation of price inflation from the target when the actual inflation strays from the target by more than 0.5 percentage point for more than six months.

The BOK said the local economy was forecast to grow 2.9 percent in 2017, with its consumer prices expected to rise 1.9 percent in the same year.

bdk@yna.co.kr

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