BOK cuts GDP outlook to 3%

South Korea’s central bank said Friday that it has revised its projection on the nation’s GDP growth rate for 2012 to 3 percent.

The figure is lower than the Bank of Korea’s earlier prediction of 3.5 percent in April and 3.7 percent in December 2011.

The BOK’s GDP outlook is even bleaker than that forecast by the Finance Ministry last month, which was 3.3 percent.

In its “Economic Outlook for Second Half of 2012,” the bank said that growth levels are projected to be 2.7 percent for the first half this year and 3.2 percent in the latter half.

The drastic revision was not unexpected as the BOK cut the key interest rate on Thursday from 3.25 percent to 3 percent for the first time in more than three years in what it said is a pre-emptive response to growing economic uncertainties in the wake of the persistent eurozone debt crisis.

“That the eurozone crisis worsened in May and June, and that the second quarter GDP which will be announced later this month is expected to be lower than before contributed to the revision in the BOK’s GDP growth outlook,” said Shin Woon, the director-general of the BOK’s research department at a press conference.

It also lowered the expected growth forecast on private consumption from 2.8 percent to 2.2 percent.

Private consumption will exhibit modest growth on the strength of an increase in real purchasing power, but at a slower pace than previously forecast due mostly to the household debt overhang and the housing market slump,” said the bank in a statement.

The forecast for construction investment growth was also downgraded from 6.2 percent to 5.8 percent, as well as that for facilities investment growth which was shifted from 2.8 percent to 1.6 percent.

It expected consumer prices to rise by 2.7 percent in 2012, while in April it forecast them to rise by 3.2 percent.

The index excluding agricultural and petroleum products is anticipated to mark a 2.2 percent rise, and that excluding food and energy a 1.9 percent increase.

The bank expected that the number of employers to increase by 380,000 in 2012, a somewhat larger rise than the 350,000 forecast in April. The unemployment rate was projected at 3.3 percent, the same as in the April forecast.

The current account surplus is expected to widen to $20 billion in 2012, an increase from April’s forecast of $14.5 billion.

“In terms of time period, its level is projected at $13.5 billion in the first half and $6.5 billion in the second,” said the bank.

For its outlook on 2013 indices, the BOK said that GDP growth would reach 3.8 percent and consumer inflation 2.9 percent. It also expected the number of people employed to increase by 320,000, unemployment rate to be 3.2 percent and the current account surplus to decrease to $18 billion next year.

By Park Min-young  (claire@heraldcorp.com)