South Korea’s central bank on Thursday downgraded its economic growth forecast for 2015, citing the weaker-than-expected recovery pace of Asia’s fourth-largest economy.
After freezing the key interest rate at a monthly policy meeting, the Bank of Korea cut its growth forecast for this year to 3.1 percent from an earlier 3.4 percent estimate.
It is the central bank’s second revision of the growth prediction in three months. In January, the BOK lowered its growth forecast to 3.4 percent from 3.8 percent.
The central bank also sharply slashed its inflation forecast to 0.9 percent from 1.9 percent. For 2016, it projected consumer prices to rise 2.2 percent, down from an earlier forecast of 2.6 percent.
The central bank updates its economic outlook each quarter — in January, April, July and October.
“The downward growth revision stems from weaker-than-expected gross domestic product data in the fourth quarter,” BOK Gov. Lee Ju-yeol said in a press conference after the meeting.
Low oil prices, which are expected to fall more steeply than the BOK’s forecast, were considered partly responsible for the cut in inflation outlook, he added.
In a separate news conference later in the day, BOK Deputy Gov. Suh Young-kyung echoed the view of the top central banker.
“(For the inflation forecast) we factored in first-quarter growth data, as well as possibilities of a further decline in global oil prices and a cut in public utilities fees,” she said.
Noting sliding oil prices and growth in Europe and the U.S. as becoming upside risks for the Korean economy, Suh picked a delay in the recovery of economic sentiment, slowing growth in China and a weakening yen as some downside risks.
While most growth forecasts for each sector were lowered, the central bank slightly raised its outlook of construction investment to 3.4 percent from an earlier 3.3 percent on prospects the property market will recover.
The outlook on private consumption fell to 2.3 percent from 2.6 percent, while that for facility investment slumped to 5.4 percent from 6 percent.
Export growth was forecast to slip 0.6 percent in the first half before gaining 6.3 percent in the second half. Annual exports were projected to reach 2.9 percent, down from an earlier estimate of 3.4 percent. Imports were forecast to grow 3 percent this year, down from 3.4 percent.
The central bank, meanwhile, projected the country’s current account surplus to total $96 billion this year, up from an earlier forecast of $94 billion. The forecast for 2016, however, was revised down to $82 billion from $85 billion, according to BOK data. (Yonhap)
