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Bank Of Korea Cuts South Korea's Growth Outlook In 2016 To 3%, Due To Instability Surrounding Economic Conditions At Home And Abroad

By January 16, 2016 at 2:50 am
Bank Of Korea Cuts South Korea's Growth Outlook In 2016 To 3%, Due To Instability Surrounding Economic Conditions At Home And Abroad (Photo : Chung Sung-Jun | Getty Images News)

The Bank of Korea, South Korea's central bank, has announced in a press release that it trimmed the country's economic outlook in 2016 to three percent, down from its previous forecast of 3.2 percent.

The bank said that uncertainties at home and abroad were the reasons for the downward revision.

Lee Ju-yeol, the governor of Bank of Korea, told ABC News that the volatility in the Chinese financial market and the sharp drop in the South Korean currency were behind the revision.

The Bank of Korea said that private consumption is expected to show an uptrend, but the expiration of the individual consumption tax cut and a slowdown in housing sales transactions may act as consumption constraints.

The bank also said that growth in facilities investment is forecasted to slow due to the uncertainties in the economic conditions at home and abroad.

Intellectual property product investment is also expected to see low growth in 2016, due to research and development investment likely to be constrained.

The sluggish global business conditions of IT and the weakening economic sentiment are seen as the causes.

The bank, though, expects construction investment to continue its increase, due to residential building construction.

However, concerns of oversupply and the worsening housing investment sentiment may also act as investment constraint.

Despite the downward revision, Bank of Korea's outlook is still more optimistic compared to private economic research centers.

Still, the downward revision is the latest reminder that South Korea, the once dynamic Asian economy, is losing steam.

South Korea's manufacturing industry, the sector that fueled the growth and development of the country with exports of ships, cars, steel, televisions, and memory chips are losing their edge quickly.

The country's manufacturing sector has been under threat from companies in China.

The country's exports have dropped eight percent last year, compared to a year ago.

But South Korea's trade ministry expects exports to recover slightly this year, increasing by two percent from last year's figures.

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