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South Korea's central bank on Thursday slashed its 2023 growth outlook to 1.7 percent, lower than outlooks from the International Monetary Fund (IMF)'s 2 percent, the Organization for Economic Cooperation and Development (OECD)'s 1.8 percent and the Korea Development Institute (KDI)'s 1.8 percent.
South Korea's central bank on Thursday slashed its 2023 growth outlook for the economy amid rising worries about an economic downturn caused by rapid interest rate hikes.
Bank of Korea (BOK) said after the rate-setting meeting that the economy was forecast to grow 1.7 percent in 2023. It was down from 2.1 percent estimated in August.
The BOK estimate was lower than outlooks from the International Monetary Fund (IMF)'s 2 percent, the Organization for Economic Cooperation and Development (OECD)'s 1.8 percent and the Korea Development Institute (KDI)'s 1.8 percent.
The BOK predicted the economy to expand 2.6 percent in 2022, unchanged from the previous estimate.
The downward revision for next year's growth outlook came on the back of sluggish export and private consumption.
The country's export reduced 5.7 percent in October from a year earlier. For the first 20 days of November, outbound shipments tumbled 16.7 percent compared to the same period of last year.
Consumption recovery, driven by eased measures against the COVID-19 pandemic, was expected to cool down amid the faltering housing market, high inflation and fast interest rate hikes.
The BOK decided earlier in the day to raise its benchmark interest rate by 25 basis points to 3.25 percent, delivering six back-to-back rate hikes for the first time.
Export for goods was forecast to increase 3.4 percent in 2022 before growing 0.7 percent in 2023. Goods export jumped 10.5 percent in 2021.
Private consumption was expected to climb 4.7 percent this year and 2.7 percent next year.
Facility investment was projected to contract 2.0 percent in 2022 and 3.1 percent in 2023 owing to higher borrowing costs and weaker global demand.
Investment in the construction sector was predicted to dwindle 2.4 percent in 2022 and 0.2 percent in 2023 due to the sagging real estate market.
Intellectual property investment was forecast to grow 4.7 percent this year and 3.6 percent next year amid lower corporate earnings, caused by the global demand slump.
The BOK said the global economy would slow down as central banks in major economies hiked policy rates rapidly amid the still high energy costs.
The outlook for next year's headline inflation was revised down to 3.6 percent from the previous 3.7 percent.
This year's consumer price inflation forecast was lowered from 5.2 percent to 5.1 percent.
The number of jobs was expected to increase 820,000 in 2022 before rising 90,000 in 2023. The outlook for the jobless rate was set at 3.0 percent for this year and 3.4 percent for next year.
The forecast for current account surplus was set at 25 billion U.S. dollars for 2022 and 28 billion U.S. dollars for 2023.