Banks think growth will drop to 3.3%

Foreign investment banks project the Korean economy will expand 3.3 percent in 2012, slowing from last year’s 3.6 percent, as growth weakens amid uncertainties about the euro zone debt crisis and slowing global growth, a report showed yesterday.

The average growth projection by 10 overseas investment banks is 0.1 percentage point lower than the 3.4-percent estimate for Asia’s fourth-largest economy made in January by nine global investment banks, according to the report by the Korea Center for International Finance.

The data comes on the heels of lower-than-expected growth in 2011. The Korean economy expanded 3.6 percent last year, slowing from 6.2 percent growth in 2010 and below the central bank’s earlier estimate of 3.8 percent.

The Bank of Korea expects Korea’s economy to expand 3.7 percent in 2012.

Of the surveyed institutions, UBS gave the lowest estimate at 2.1 percent, and Nomura lowered its growth projection for Korea to 2.7 percent from its previous estimate of 3.0 percent.

Nomura said exports would grow 5.5 percent this year, the lowest since 2002 when the comparable figure was 8 percent. Private spending is likely to grow 1 percent this year, slowing from last year’s 2.3 percent.

Meanwhile, the Korea Development Institute said yesterday the central bank should raise interest rates to help price stability.

It said the Bank of Korea needs to deliver a signal to the market that price stability is its top priority.

“The authorities are urged to normalize macroeconomic policies and guard the economy against growing uncertainties,” it said. Yonhap