South Korean central bank on Tuesday cut the country's economic growth forecast for 2008 to 4.6 percent, lower than previous forecast of 4.7 percent, as the country's consumer inflation is expected to reach a 10-year high.
"The Korean economy is likely to lose steam amid weakening domestic demand although exports will likely remain robust," said Kim Jae-chun, head of the Bank of Korea (BOK)'s research department.
"But inflation is expected to continue its upturn for quite a long time, breaching the BOK's target range of 2.5-3.5 percent," he added.
According to a forecast by the BOK, the country's economy is likely to grow 3.9 percent in the second half from a year earlier, down sharply from an earlier estimate of 4.4 percent.
However, the economy is estimated to have grown 5.4 percent in the first half on brisk exports, up from the previous forecast of 4.9 percent, it said.
Kim said that inflation is likely to be higher in the third quarter than in the fourth quarter while the economy will likely grow at a slower pace in the fourth quarter.
Exports, which account for about 40 percent of the country's GDP, are forecast to grow 9.8 percent this year, down from a 10.3 percent expansion estimate. Consumer spending will likely slow to 3 percent in 2008, compared with an earlier prediction of 4.3 percent, the central bank said.
The downgrade of the forecast comes as South Korea is facing increasing inflationary pressure and downside risks to economic growth. The government recently said that South Korea's economic growth could fall below 5 percent this year, hinting that its earlier target of 6 percent is too lofty to achieve amid toughening external conditions.
Source:Xinhua
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