South Korea's finance ministry on Thursday slashed its 2013 growth outlook for the country to 2.3 percent from an earlier estimation of 3 percent, citing uncertainties in the global economy and risk factors in the domestic economy such as massive household debts and the sluggish real estate market.
The No. 4 economy of Asia was expected to grow at an annual rate of 2.3 percent in 2013, lower than the 3 percent expansion estimated three months before, according to the Ministry of Strategy and Finance. The economy rose 2 percent in 2012, the lowest since 2009 when the global financial crisis peaked.
Reflecting the expected low-growth trend, the outlook for employment was revised down to 250,000 jobs to be created from an earlier forecast of 320,000 jobs. The outlook for consumer price inflation was cut to 2.3 percent from 2.7 percent due to low inflationary pressures on the demand side.
The global economic uncertainties were cited as the main cause for the downgrade. Exports, which account for around half of the South Korean economy, faced slower recovery due to fiscal crises in Europe and the U.S. along with the weakening of the Japanese yen against the U.S. dollar.
Private consumption, another growth engine of the economy, was predicted to grow at a low rate as consumers are increasingly refraining from opening their purses due to growing burden to repay debts and falling property prices.
Housing transactions in the metropolitan area fell to 735,000 in 2012, the lowest since the related data began to be compiled in 2006. Housing prices declined 5.2 percent from the prior peak, and construction investment kept its downward trend for three years in a row last year.
Facility investment continued to reduce this year amid the persistent uncertainties at home and abroad and the weakening of domestic demand. Capital spending by local companies fell 6.5 percent in January.
Household debt growth continued to slow to 5.2 percent in 2012 from 8.1 percent in 2011 and 8.7 percent in 2010, but the delinquency ratio for the debts held by banks showed an upward trend, boosting concerns over the rising debt-servicing burden for households.
