Growth outlook likely to fall to 4%

(Bloomberg)

The government is considering cutting the growth forecast for next year to about 4 percent from the current 4.5 percent in light of the problems in Europe, officials said Sunday.

A downward adjustment would track similar revisions at international institutions and local think tanks, where the consensus now stands at between 3.6 and 3.8 percent.

“The changing trends in the global economy will be reflected,” said an official at the Finance Ministry. The ministry is widely expected to scale down its economic outlook due Dec. 12.

The Organization for Economic Cooperation and Development on Nov. 28 lowered its 2011 forecast for Korea to 3.7 percent, down 0.9 percentage point from 4.6 percent.

Samsung Economic Research Institute predicted 3.6 percent and cited Europe’s ability to produce a solution to their debt crisis as the biggest variable to Korea’s performance next year.

Asia’s fourth-largest economy grew 6.2 percent in 2010, posting one of the fastest recoveries following the financial crisis. The pace slowed to 3.8 percent on-year in the first half of this year and down further to 3.4 percent in the July-September period.

Exports, making up half of the country’s output, grew at the slowest pace in two years in November, gaining 8 percent.

Finance Minister Bahk Jae-wan has already hinted that Seoul may lower its projection soon, saying on Nov. 21 that the Finance Ministry would factor in the cut in the state-run Korea Development Institute’s projection.

“I understand that the KDI scaled down its growth forecast to 3.8 percent, rightfully so as economic momentum slows. There could be more than one way of projecting how the economy will perform and we’ll take that into account,” Bahk said after a finance forum in Seoul.

KDI on Nov. 20 slashed its 2012 outlook to 3.8 percent from 4.3 percent.

Bahk, in the same week, said that the economy would regain its growth momentum in the second half of next year when external uncertainties clear up in Europe.

By Cynthia J. Kim (cynthiak@heraldcorp.com)