S. Korea cuts growth outlook for 2012, 2013

PHOTO: S. Korea cuts growth outlook for 2012, 2013

SEOUL - The South Korean government has slashed the nation's growth outlook for 2012 and 2013, citing the eurozone debt crisis and US fiscal woes that continue to dampen global demand.

In a biannual economic outlook, the finance ministry revised its earlier estimate of 4.0 per cent growth in 2013 to 3.0 per cent, and the 2012 estimate from 3.3 per cent to 2.1 per cent.

"The economy continues to slow... as global demand dragged down by prolonged eurozone debt crisis and lingering uncertainty dampen sentiment," the ministry said in a statement, released on Thursday.

The growth of Asia's fourth-largest economy will continue to be limited in the first half 2013, but will "slightly improve" in the latter half when its major markets are expected to show signs of recovery, it added.

Exports account for about a half of the South's economy and have been pummelled recently by a general slowdown in developed countries.

But the ministry predicted overseas shipments of cars, mobile gadgets and other products and services would increase 4.3 per cent next year after shrinking 1.3 per cent in 2012.

The forecast was in line with a World Trade Organisation estimate that global trade will expand 4.5 per cent next year from 2.5 per cent in 2012.

Imports will increase 4.6 per cent in 2013, the finance ministry added, resulting in an annual current account surplus of around US$30 billion (S$36.68 billion), down from this year's estimate of US$42 billion.

Consumer prices are expected to rise 2.7 per cent next year, faster than this year's 2.2 per cent but within the central bank's target range of between 2.5 and 3.5 per cent.

The ministry pledged a "flexible" fiscal policy to help stimulate the economy, including frontloading at least 60 per cent of the entire 2013 budget in the first half of the year.