S. Korea to revise down its 2013 growth outlook

South Korea plans to revise down its 2013 economic growth forecast as exports will likely lose steam amid the protracted eurozone debt crisis and China's slowing economy, officials said Sunday.

The government said Asia's fourth-largest economy is likely to grow less than its projection of 4.3 percent next year after expanding some 3 percent this year.

"The government has no plans to revise its 2012 growth forecast for now. But it plans to downgrade the next year's growth forecast as the current goal seems to be unattainable," said a high-ranking official at the finance ministry.

The government earlier said the local economy is likely to grow 3.3 percent this year, slower than the 3.6 percent recorded last year. The central bank's 2012 and 2013 growth forecast stood at 3 percent and 3.8 percent, respectively.

The prolonged eurozone debt turmoil and China's slowing growth are blurring prospects for the Korean economy, which heavily depends on overseas shipments for growth. More analysts bet on another rate cut by the Bank of Korea as early as this month to 2.75 percent.

Unlike the 3-percent growth outlook presented by the government and the central bank, analysts said the growth rate of the Korean economy is expected to remain in the 2-percent range this year, citing sputtering exports.

Exports have already showed signs of faltering and fell 6.2 percent on-year in August, leading their combined value to post a 1.5 percent on-year fall during the first eight months. Imports also declined 9.8 percent last month from the previous year, indicating that domestic demand remains sluggish.

Private think tanks are also in a rush to revise down their 2012 growth projection to the 2-percent range as weak exports will make it difficult for the country to attain the 3-percent growth target.

The state-run Korea Development Institute (KDI) will also join the move to further cut the growth outlook this month from its current estimate of 3.6 percent.

Moody's Investors Service Inc, which upgraded its sovereign credit rating on Korea to "Aa3" on Monday, said its growth forecast for Korea could slow to around 2.5 percent if the eurozone debt crisis continues.

The Korean economy has begun to underperform its growth potential in the second quarter, making demand-pull inflationary pressure ease. Some analysts cautiously said falling asset prices and high household debt are feared to spark a spiral of debt deflation.

To boost the weak growth, the government had said it plans to pour fiscal spending of more than 8.5 trillion won (US$7.5 billion) in the second half without setting aside a supplementary budget.

Officials said that in mid-September, the government plans to announce details for that spending. (Yonhap News)