S. Korea trims growth forecast, vows to spur consumption

SEOUL — South Korea on Monday trimmed its economic growth forecast for 2015 to 3.8 per cent from 4 per cent as it vowed to continue expansionary policies aimed at spurring domestic consumption.

The revised projection comes after the country's central bank this month warned its own 3.9 per cent growth forecast would be "difficult" to maintain as domestic demand alternated between positive and negative territories and a weak yen hurt the price competitiveness of South Korean firms against Japanese rivals abroad.

The finance ministry said Monday that, in addition to the 2015 growth forecast being lowered, its estimate for this year's economic growth was also revised down to 3.4 per cent from 3.7 per cent. South Korea's economy grew 3 per cent last year.

"We must maintain our expansionary macroeconomic and fiscal policies so that people can feel the effect of economic recovery," President Park Geun-hye said at a meeting of economic ministers on Monday.

Consumer spending has recovered at a slower-than-expected pace this year despite a government stimulus package and a series of cuts in the Bank of Korea's key interest rate, which now stands at 2.0 per cent.

The ministry said domestic demand may pick up next year, helped by lower oil prices.

"Our economy will pick up gradually thanks to our expansionary macroeconomic policy, lower international oil prices and an expected global economic recovery," Finance Minister Choi Kyung-hwan said.

But economic weakness in China and Europe, as well as the US Federal Reserve's expected policy tightening, might weigh on South Korea's growth, the ministry said.

It also said consumer prices are expected to rise about 2 per cent next year, faster than this year's estimated 1.3 per cent rate.

The country's current-account surplus for 2015 may fall to $82 billion in 2015 from $89 billion this year, it added.