SEOUL, South Korea– South Korea’s central bank has trimmed its forecast for the country’s growth in 2017 partly due to the fallout from a massive influence-peddling scandal, AP reports.
Bank of Korea said Friday that the economy will likely expand 2.5 percent this year, slower than its October prediction of 2.8 percent growth. It said Asia’s fourth-largest economy will grow 2.8 percent in 2018.
The bank cited weak private consumption because of meager income growth, heavy household debts and the repercussions from the scandal. Parliament impeached President Park Geun-hye in December and the Constitutional Court is considering whether she should be removed from power permanently for allegedly letting a long-time friend secretly meddle in state affairs.
Uncertainties over the next presidential election have left companies reluctant to increase investment and hiring. Bank of Korea Gov. Lee Ju-yeol told reporters that economic policy should focus on encouraging consumer spending.
South Korea’s shipping and shipbuilding companies have shed tens of thousands of jobs to stem heavy losses. Youth unemployment has risen, pushing the number of jobless among 15 to 29-year-olds to 1 million people for the first time last year. Lee said the grim job market was hurting consumer sentiment.
Despite slowing growth, inflation is expected to rise to 1.8 percent this year from 1.0 percent in 2016, partly due to higher oil prices. Bank of Korea kept its policy rate at 1.25 percent this month, keeping the benchmark rate at a record low for a seventh straight month.