Seoul, South Korea (4E) – Citing escalating fiscal woes in the euro zone, the International Monetary Fund (IMF) lowered its growth forecast for the South Korean economy this year.
In its report released today, the IMF projected a 3.0 per cent economic growth for Korea in 2012, which is lower compared to its previous forecast of 3.25 percent growth announced back in June. The Fund has projected a 4 per cent growth rate next year for the Korean economy.
In a report released on July 13, the Bank of Korea projected a 3 per cent growth this year and 3.8 per cent next year.
The continuing debt crisis in the euro zone has hurt demand in many of the exporting economies in Asia including South Korea, a country that relies heavily on exports for its economic output.
Shipments of Korean-made goods to neighboring China reportedly have also taken a tumble as growth in the world’s second largest economy continues to cool down.
Hoe Ee Khor, IMF Asia-Pacific assistant director, said the Fund could announce another downgrade in October given the negative forecasts in the global economy.
The central bank surprised the market when it reduced borrowing costs in July. Since then, it has kept rates steady to retain some flexibility in monetary policy should the global economic slowdown deepens.
On September 10, the government announced several stimulus measures like tax cuts and spending incentives worth $ 5.2bn to spur domestic consumption and investment.
The IMF believes the central bank has enough room to cut interest rates further.
Category: Macro Economics
There are no comments yet. Why not be the first to speak your mind.