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BOK cuts GDP growth projection to 2.8%


By Kim Yon-se


The Bank of Korea said Friday that it has revised its outlook on the growth of the nation’s gross domestic product for this year to 2.8 percent, down from its earlier projection of 3.2 percent.

Further, the central bank predicted that the first-half economic growth will stay at 1.9 percent on a year-on-year basis.

Its prediction on the 2013 economy was unveiled right after the BOK’s Monetary Policy Committee announced it would maintain the benchmark interest rate untouched at 2.75 percent annually earlier in the day.

The slash in the growth outlook by 0.4 percentage point represents economists’ worries over unfavorable indices for this year. The revision was announced only three months after the BOK said the economy would grow at a rate of 3.2 percent in 2013 in its October projection.

Further, the bank has become more pessimistic than the Finance Ministry, which forecast a 3 percent growth rate for this year in its December report.

According to a BOK research report, the lethargic recovery in the global economy will somewhat negatively affect the Korean economy.

“Though there was a gradual economic recovery the United States, the sluggish indices lingered on in Europe,” the bank said in a statement. “Uncertainties involving the eurozone debt crisis and the U.S. fiscal austerity are still going on.”

Earlier than the BOK, some private think tanks started to unveil their gloomy 2013 GDP outlook that stood below 3 percent from the end of last year.

According to coming situations, there is a possibility that global research institutes will follow suit. The International Monetary Funds and the Organization for Economic Cooperation and Development had predicted that Korea will grow this year by 3.6 percent and 3.1 percent, respectively.

Concerning the 2012 economy, BOK Governor Kim Choong-soo said quarterly growth in the October-December period is estimated to stay at around 0.4 percent, down from the central bank’s earlier estimate of 0.8 percent.

As for the consumer price path in 2013, the bank said, “There are upside risks, including those posed by the possibility of run-ups in oil prices from geopolitical risks in the Middle East and by public utility charge hikes.”

With the Monetary Policy Committee’s decision to leave the base rate unchanged at 2.75 percent until the next meeting, many analysts in the private sector are issuing the possibility that the BOK will choose to cut the key rate during the first quarter in a bid to boost the economy.

In a statement, the rate-setting committee said it appraises economic growth to remain at a weak level, with indicators related to exports and domestic demand alternating between improving and worsening.

“We anticipate that the negative output gap (between demand and exports) in the domestic economy will persist for a considerable time, due mostly to the slow recovery of the global economy in consequence chiefly of the sluggishness of economic activities in the euro area,” said the committee.

(kys@heraldcorp.com)