South Korea's central bank on Monday cut the nation's economic growth forecast for 2012 to 3.5 percent, citing a global slowdown including waning demand from debt-hit Europe.

This file photo shows a traditional Korean gatekeeper standing in front of the Gyeongbok Palace in Seoul. S.Korea's central bank on Monday cut the nation's economic growth forecast for 2012 to 3.5 percent, citing a global slowdown including waning demand from debt-hit Europe. , Photo: AFP

Gross domestic product in Asia's fourth-largest economy would expand 3.5 percent this year, lower than the 3.7 percent estimated last December, the Bank of Korea said in its revised 2012 economic outlook report.

South Korea's GDP grew 3.6 percent in 2011.

"The recent easing of uncertainties on Europe's debt problems is a positive factor, but downward revisions of global economies and rising oil prices are overshadowing such positive factors," the BOK said in a statement.

Exports of goods will increase 4.8 percent this year, slower than the earlier forecast of 5.0 percent, due to weak demand from the EU – the nation's second-largest trading partner – the BOK said.

Overseas sales of goods, which account for nearly 90 percent of total exports, rose 10.5 percent last year from 2010, it said.

The current account surplus will reach US$14.5 billion in 2012, higher than the December forecast of $13 billion but far lower than the $26.5 billion posted in 2011, it said.

The account is the broadest measure of trade with the world.

Slower growth will likely leave inflation within the central bank's target range of two to four percent, with consumer prices expected to rise 3.2 percent this year compared with four percent last year, it said.

The Bank of Korea last week left a key interest rate unchanged at 3.25 percent for a 10th consecutive month, citing external uncertainties.

Peter Park, analyst at Woori Investment & Securities, told Dow Jones Newswires that the central bank's revised figure was still too optimistic.

"The BOK's assessment of the economy is still too bullish and fails to reflect recent developments in the eurozone including the resurfacing of Spain's debt troubles," he said.

"If the situation in Europe turns for the worse, the central bank will have to make further downward revisions to its outlook," said Park.

-- Dow Jones Newswire contributed to this report--

Source: AFP