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(LEAD) BOK cuts S. Korea's growth forecast to 2.7 pct for 2018

All Headlines 13:36 October 18, 2018

(ATTN: ADDS more info from 3rd para)

SEOUL, Oct. 18 (Yonhap) -- The Bank of Korea (BOK) on Thursday revised down its earlier economic growth forecast for South Korea to 2.7 percent for 2018 due to heightening economic uncertainties over trade tensions.

In the monetary policy meeting for October, the central bank cut 0.2 percentage point from its earlier growth outlook of 2.9 percent announced in July.

It is lower than the finance ministry's 2.9 percent outlook and the International Monetary Fund's 2.8 percent prediction.

If South Korea growth hits 2.7 percent as predicted by the BOK, it will be the lowest tallied since Asia's fourth-largest economy grew just 2.3 percent in 2012.

The South Korean economy expanded 3.1 percent in 2017 and 2.9 percent in 2016.

For 2019, the BOK also adjusted down its growth estimate by 0.1 percentage point to 2.7 percent from its previous outlook.

The downward adjustment came as the latest economic numbers reflected the disappointing job creation and deepening trade tensions between the United States and China.

The number of newly added jobs fell to 17,000 in the third quarter of the year, plunging from a 101,000 gain three months earlier.

For the entire 2018, the BOK expected some 90,000 new jobs to be created, sharply down from an 180,000 estimate published three months earlier.

Corporate investment slowed down rapidly as second-quarter facility investment dropped 5.7 percent on-year and will decline a projected 0.3 percent at the end of the year.

"Employment may turn around in the latter half of this year on the back of the government's job creation packages," the central bank said. "But a protracted slump and on-going restructuring in some key industries will likely continue to weigh heavily on the employment market."

The central bank also forecast that consumer prices will rise 1.6 percent this year and 1.7 percent next year, getting closer to the target inflation of 2 percent.

It noted that as the world economy will keep suffering from the trade row between the two economic powerhouses, South Korea may experience a slight slowdown in exports, the country's key economic driver.

Exports will likely grow 3.5 percent this year and 3.2 percent next year, down from a 3.8 percent expansion in 2017.

"We see that such external risks seemed to surface and escalate rapidly. We face far higher uncertainties," BOK Gov. Lee Ju-yeol said.

"Some may think 2.7 percent is low, but it is still in line with our growth potential."

The BOK said earlier that the potential growth level of South Korea is around 2.8 to 2.9 percent.

(LEAD) BOK cuts S. Korea's growth forecast to 2.7 pct for 2018 - 1

brk@yna.co.kr
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