Banks see 2% growth for economy in 2012

Major foreign investment banks are expecting Korea’s economic growth to remain in the mid-2 percent range for this year because of faltering exports, a report showed yesterday.

Ten foreign investment banks forecast the Korean economy to grow an average of 2.6 percent this year, according to a report by the Korea Center for International Finance.

Their forecast stood in contrast with the central Bank of Korea’s 3 percent growth estimate and the government’s 3.3 percent projection.

The prolonged euro zone debt crisis and China’s slowing economy are dampening the prospects for the export-dependent Korean economy. Many analysts have forecast the Korean economy to grow in the 2-percent range this year.

The Korean economy grew 0.3 percent in the second quarter from three months earlier, a third of the 0.9 percent on-quarter expansion in the first quarter, spawning concerns that the country’s economic momentum is weakening.

In the first half, Asia’s fourth-largest economy grew 2.6 percent from a year earlier.

BNP Paribas put the lowest growth estimate for South Korea at 2 percent for the year, with BofA Merrill Lynch forecasting 3 percent growth.

The growth estimates offered by the remaining eight investment banks range from 2.3 percent to 2.8 percent, according to the report.

Exports fell 1.8 percent on-year to an estimated $45.66 billion last month. Exports in August dropped 6.2 percent on-year, following an 8.8 percent plunge in the previous month.

Last month Korea’s central bank unexpectedly froze the key interest rate at 3 percent for the second straight month in an apparent bid to save ammunition for any worsening of economic conditions at home and abroad.

The BOK froze the key rate last month after a surprise cut in July to cushion the impact of the euro zone debt crisis on the economy.

Yonhap