The Bank of Korea on Thursday revised down its growth forecast to 3.4 percent from 3.9 percent for this year amid weakening consumption and private investment.

The central bank also cut its inflation forecast to 1.9 percent from 2.4 percent, and kept its key base rate at 2 percent for the third consecutive month due to the continued global economic slowdown.

The U.S. seemed to be the only major economy showing signs of a moderate recovery this year, the BOK noted. The BOK cut its growth forecast to lower than the Finance Ministry’s 3.8 percent, which was revised down from 4 percent last month.

BOK Gov. Lee Ju-yeol said low growth in the fourth quarter of last year led the central bank to slash its growth outlook and froze its key interest rate. The BOK is expected to cut its interest rate at least once in the first half of this year to support the government’s fiscal stimulus.

Korea’s gross domestic product is expected to have expanded 0.4 percent in the fourth quarter of last year from the previous quarter due to a slowdown in exports, lower than the initial forecast of 1 percent, Lee told reporters.

“This was the reason (the central bank) lowered this year’s forecast by about 0.5 percentage point.”

Gov. Lee noted that the country’s tax revenue shortfall adversely affected government spending and infrastructure investment, adding that the implementation of a law restricting mobile phone subsidies dampened telecom consumption.

However, he said the central bank and the Finance Ministry shared the same views on the Korean economy based on fourth-quarter data. Finance Minister Choi Kyung-hwan said in a meeting with local companies in Busan on Thursday that the economy would recover but not enough to be felt by the middle class.

The BOK added that it had lowered the inflation forecast due to decreasing global oil prices, which would likely help cut manufacturing costs and fuel the economy.

BOK Gov. Lee forecast that Korea would grow an average of 1 percent on-quarter as the global economy would perform better this year than last year.

“Last year, the Sewol sinking tragedy severely affected Korea,” resulting in quarterly growth of only 0.7 percent, Lee said.

“We expect this year’s economy to be better than last year.”

By Park Hyong-ki (hkp@heraldcorp.com)