The Bank of Korea (BOK) cut its forecast for economic growth and inflation in 2013 and said the pace of recovery in the first half of this year would be below South Korea's long-term trend.
BOK, which held its base rate steady at 2.75 percent on Thursday, said in its Economic Outlook for 2013 that the contribution of exports to overall growth this year would continue to outstrip that of domestic demand, as in 2012.
"Exports are expected to show faster growth than last year, as the world economy gradually recovers and the volume of trade increases," the BOK said, forecasting export growth of 5.5 percent in 2013 and 8.2 percent in 2014. In 2012 exports are forecast to have risen by 3.6 percent.
For 2012 the BOK forecasts Gross Domestic Product growth of 2.0 percent, down from its previous forecast in October of 2.4 percent, and for 2013 it forecasts growth of 2.8 percent, down from a previous 3.2 percent forecast. Year-on-year growth in the first half of 2013 is forecast at 1.9 percent, rising to 3.5 percent in the second half.
For 2014 the BOK forecasts GDP growth of 3.8 percent. South Korea's average quarterly growth rate from Q1 2001 to Q2 2008 was 1.2 percent.
South Korea's headline inflation rate is forecast to rise to an average of 2.5 percent in 2013, down from its previous forecast of 2.7 percent, and then rise further to 2.8 percent in 2014. In 2012 the inflation rate was 2.2 percent.
The BOK targets inflation of 2.5-3.5 percent for the 2013-2015 period.