BOK cuts 2014 growth estimate to 3.8%

South Korea's central bank on Thursday revised down its 2014 growth forecast for Asia's fourth-largest economy to 3.8 percent from its earlier estimate of 4 percent amid lingering economic uncertainty. The downward revision by the Bank of Korea (BOK) came as the International Monetary Fund (IMF) on Tuesday cut its outlook for the global economy by 0.2 percentage point to 3.6 percent for next year. The BOK maintained its 2013 growth estimate for the local economy at 2.8 percent. The BOK's outlook revision comes as its monetary policy committee earlier in the day froze its key interest rate at 2.5 percent for the fifth straight month. The IMF downgraded its 2014 growth forecast for the Korean economy to 3.7 percent from an earlier estimate of 3.9 percent, citing the low global growth and persisting downside risks. The BOK said that downside risks overwhelm upside risks to growth, citing uncertainties over the Federal Reserve's monetary stimulus tapering, U.S. fiscal impasses and the instability of oil prices, as negative factors for the Korean economy. "Compared with July, the global economic outlook was lowered mainly due to a slowdown in emerging countries," Shin Woon, the director general at the BOK's research department, told a press conference. Reflecting stable oil and farm product prices, the BOK dropped its 2013 consumer inflation forecast to 1.2 percent from its earlier projection of 1.7 percent. The 2014 inflation outlook was also reduced to 2.5 percent from 2.9 percent. The central bank also sees larger downside risks for inflation, saying that international commodity prices are on the decline amid the slowdown in the global economic recovery. But Shin downplayed concerns about deflation, claiming that the slowing trend of monthly consumer prices would reverse as inflation is likely to pick up down the road. Exports, which account for about 50 percent of the South Korean economy, are likely to grow 5.5 percent this year before gaining 7.2 percent next year. Private spending will likely advance 1.9 percent in 2013 and grow 3.3 percent next year, it added. Facility investment is expected to contract 1.2 percent this year, compared with the BOK's earlier estimate of a 1.8 percent gain. Capital spending is likely to rise 5.7 percent in 2014. Construction investment will likely grow 6.1 percent this year before advancing 1.7 percent next year, the bank added. The central bank raised its 2013 forecast for the current account surplus to US$63 billion from its July estimate of $53 billion. In 2014, the surplus is likely to reach $45 billion, it said.