South Korea Cuts Down Economic Growth Forecasts

The growth forecast for 2012 has been lowered down by South Korea after election of the new President on 19th December. Incidentally, preliminary revision has also been made to the 2013 growth forecast. In September, it was predicted that the Gross Domestic Product will increase by 4% in 2013; however, the same has now been lowered down to 3% by the Finance Ministry of the country. For current year, the initially estimated growth was of 3.3%; however, the same has now been revised to 2.1%. These changes make the Government forecasts closer to that of the private economists and also the Central Bank.

Euro region is one of the main export areas for South Korea and the financial decline in that region has hit the export figures. Park Geun Hye, who will take office in February, next year, needs to make extra spending, as predicted by many economists, if a better figure is to be achieved in 2013. The Director General at the Ministry probably outlined the problem in the best manner as he stated that the downside risks from Euro region are worse than initially anticipated.

South Korea’s major currency Won has increased by 0.1% against USD and is at 1072.00 per greenback. In 2012, Won has advanced a total of 7.5% and this mark the biggest surge of the most-traded 11 Asian currencies.

The Bank of Korea officials stated that they will continue to support the economic recovery. However, they will also examine the possible economic imbalances that may arise from the extended duration of the accommodative monetary policy of the bank. It added that any sort of upward pressure on the consumer prices is not expected at this point of time.

The Central Bank, on the other hand, reported that the growth rate of the country will increase sometime during May-June next year as the overall global economy is expected to recover as well. The current benchmark interest rate of South Korea is set at 2.75%.

According to an economist of Woori Investment & Securities, Sun Yoo, it is important to see that whether the new Government will make some stimulus or not. According to Finance Ministry report, the current-account surplus may get down to $30 billion next year. The exports are expected to rise by 4.3%, whereas, inflation is expected to be in the 2.5%-3% region.