The Organization for Economic Cooperation and Development Wednesday downgraded its growth forecast for South Korea to 4.3 percent this year, 0.9 percentage points below the previous projection in December 2007.
The OECD attributed the revision to sluggish facility investment in the first quarter and the contraction of the housing market.
The OECD report added that the inflation, which has breached the Bank of Korea's inflation target for six straight months, will return to the target zone next year since inflationary pressures will be brought down by slower growth in 2008 and moderation in prices of raw materials.
Meanwhile, the OECD pointed out the high sensitivity of South Korea's information and communication technology sector and energy imports on external developments as risks that could hurt growth. Too much household debt, which has increased to an average of about 150 percent of disposable income in 2007, from 85 percent in 1998, is another risk, the report said.
The OECD report advised South Korea to consistently implement reformative measures to induce more foreign direct investment. Also, to ensure the government's fiscal soundness, tax cuts should be accompanied by reduction in government spending, it added.
Source: Xinhua
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