South Korea's economy will grow 3.7 percent in 2014, the government predicted Thursday, revising down its previous estimate as it worried that anemic consumption and slowing exports growth could hurt its overall economic recovery.

The latest estimate is lower than the 3.9 percent gain the government expected earlier this year, later hiked to 4.1 percent to reflect amended statistics standards, according to the finance ministry. The government also projected the economy will grow 4 percent in 2015.

"We thought that the economy would remain on a recovery track... but things are getting worse than expected," the ministry said. "Exports, which had propped up our economy, are also facing unsure situations amid a global economic slowdown and other competing countries catching up."

The bleak assessment is part of the ministry's economy management plan for the new economic team led by Finance Minister Choi Kyung-hwan, who took office last week. The plan is focused mostly on boosting domestic demand, stabilizing people's livelihoods and reforming the overall economic structure.

The 3.7 percent growth estimate is slightly higher than the forecast by the Bank of Korea, which also recently revised down its growth forecast from 4 percent to 3.8 percent.

The downgrade comes amid deepening worries that the economy, Asia's fourth-largest, is facing toughened situations at home and abroad, with a slowdown in consumption, corporate investment and exports growth.

The economy was also hard-hit by frozen consumption in the wake of the April ferry disaster that left more than 300 people dead. People refrained from spending on tourism and other leisure activities as the nation was in mourning.

Industrial output and employment both remained weak. Government data showed that industrial output shrank for the second straight month in May, while the number of employed people declined for the fourth consecutive month in June.

The central bank said earlier in the day that South Korea's economy grew 0.6 percent in the second quarter, the first slowdown since the third quarter of 2012.

In his inauguration speech on Wednesday last week, Finance Minister Choi said that the economy is mired in a "low growth trap," vowing that he will run the country's macroeconomic policy in an "expansionary" manner until the economic sentiment is revived.

The latest government growth projection is based on the assumption that the global economy will grow 3.6 percent this year with crude oil prices standing at about US$106 per barrel. The global growth outlook by the International Monetary Fund could be lowered in the near future, market observers said.

Along with the growth revision, the ministry expected the country's consumer prices will grow 1.8 percent, revising down from the previous 2.3 percent. It kept its forecast of job creation for this year at 450,000.

The ministry, in particular, said that the country will register an annual current account surplus for this year that could represent 5 percent of the gross domestic product, which is higher than the previous forecast of 3.4 percent.

The sharp increase in surplus will stem mostly from slowing import growth caused by less consumption in the domestic market, the ministry explained. (Yonhap)