KERI downwardly revises growth forecast to 2.6%

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KERI downwardly revises growth forecast to 2.6%

Korea’s economic growth will likely lose steam in 2012 due to the lingering debt crisis in the euro zone and a slowdown in the U.S. and Chinese economies, a think tank said yesterday.

The Korea Economic Research Institute (KERI) revised down its growth forecast for Asia’s fourth-largest economy in 2012 to 2.6 percent from the previous 3.2 percent.

The think tank said that the slowing Chinese economy will weigh heavily on Korea’s exports in the midst of prolonged debt problems in Europe and a delayed recovery of the U.S. economy.

However, it forecast that the trade surplus will expand to $30.3 billion won this year, thanks to a decline in imports and an improvement in its service account.

The think tank earlier expected the country’s trade surplus for 2012 to reach $15.9 billion.

Consumer prices will grow a modest 2.6 percent by the end of 2012, down 0.5 percentage point from its earlier forecast of 3.1 percent.

The local currency is expected to hover around 1,140 won against the U.S. dollar for the rest of the year, KERI said.

It noted that Korea may face deflation due to rising household debt, a drop in property value and a prolonged economic slump, saying that appropriate measures are quickly needed to prevent this from happening.


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