ADVERTISEMENT
News » Money
Jul 10, 6:15 AM EDT

Bank of Korea cuts economic growth forecast as ferry disaster dented consumption


AP Photo
AP Photo/Ahn Young-joon
World Video

Buy AP Photo Reprints
Multimedia
Swift negotiations free U.S. journalists
Timeline of U.S.-North Korea relations
Timeline of North Korea's nuclear and missile programs
Depth of Field: North Korea
A look at Kim Jong Il
Truth emerges about Kim Soo-im
Commission: U.S. military killed Korean refugees
South Koreans Protest U.S. Beef Accord
S. Korea Women Keep Diving Tradition Alive
Bittersweet Homecoming: Koreans Return Home After 68 Years in Russia
Latest News
North Korea launches 2 ballistic missiles into the sea, the latest in a series of test-firings

In South Korea, where ex-spies can become celebs, former 'Mata Hari' remains stuck in the cold

Bank of Korea cuts economic growth forecast as ferry disaster dented consumption

North Korea offers talks on its participation in Asian Games in rival South Korea

North Korean leader Kim Jong Un limps at televised event

Multimedia
A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
Stocks stabilize, but end with biggest weekly loss since April as investors grow cautious

Lorillard, Fastenal, Rent-A-Center, MGIC Investment, and Amazon are big market movers

How the Dow Jones industrial average and other major indexes fared on Friday

US stocks nudge higher but end with their biggest weekly loss since April

US stocks slip in midday trading and are heading for their biggest weekly loss since April

Economists cut US growth forecasts, but remain optimistic economy will recover from grim 1Q

US stocks slip in early trading and are heading for their biggest weekly loss since April

California man gets 15-year prison sentence for economic-espionage conviction involving China

French economy minister blames the EU for lack of growth, seeks new economic strategy

Greece raises 1.5 billion euros in 3-year bond auction, with yield set at 3.5 percent

Interactives
Greece's Debt Threatens to Spread
State budget
gaps map
Auto industry problems trickle down, punish Tennessee county
Women give old Derby hats a makeover in tough economy
S.C. town deals with highest unemployment in South
How mortgages were bundled and sold as securities
Tracking the $700 billion financial bailout
Tracking the year's job losses
State-by-state foreclosures since 2007
Credit crisis explained
Presidents and their economic legacies
Lexicon of the financial crisis
Americans' addiction to debt

SEOUL, South Korea (AP) -- South Korea's central bank said economic growth will be slower than expected this year because consumer spending has waned following a deadly ferry sinking.

Lee Ju-yeol, governor at the Bank of Korea, said Thursday that South Korea's economy will expand 3.8 percent this year instead of 4.0 percent predicted in April.

He said outlook for next year was also downgraded. Asia's fourth-largest economy will likely grow 4.0 percent, not 4.2 percent, in 2015.

The revision was due to a decline in consumer spending after the April 16 ferry disaster that profoundly shocked South Koreans. The tragedy killed 293 people and left 11 missing. Most of the dead were teenagers on a school trip.

Sales of clothes, food and fuel dropped in April. Tourism, restaurant and leisure industries took most of the brunt of the tragedy because schools canceled trips and South Koreans refrained from drinking and other festive activities.

In May, the drop narrowed but spending still remained sluggish.

Inflationary pressure was also weakened, giving policymakers room to support the economy. Consumer prices will increase 1.9 percent this year, lower than the previously forecast 2.0 percent increase, the bank said.

Also Thursday, Bank of Korea left its policy rate unchanged at 2.5 percent for a 14th month. However, the decision was not unanimous, with one policymaking dissenting.

Lee said South Korea's economy faced a higher chance of slowing. Even then, policymakers kept the rate steady because the recovery was intact, albeit a bit slower than before, he said.

South Korea's finance minister nominee expressed similar views during a parliamentary hearing, saying there was a higher downside risk to South Korea's growth. Choi Kyung-hwan said he would swiftly introduce measures to stimulate the economy once he takes office. Choi, seen as pro-growth, said he would seek to stimulate the housing market.

© 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.

 
ADVERTISEMENT