South Korean consumer confidence failed to improve this month as a budget stand-off in the U.S. and austerity measures in Europe highlighted risks for the nation’s exports.
The Finance Ministry may follow the Bank of Korea in paring its growth forecast for next year when it releases new projections tomorrow, according to An Ki Tae, an economist at Woori Investment & Securities Co. in Seoul. American lawmakers face a year-end deadline for preventing more than $600 billion in scheduled tax increases and spending cuts from dragging down a recovery, while the euro region continues to wrestle with a sovereign-debt crisis.
“The government’s current 4 percent projection is unrealistic, and they know it,” said An. “The Finance Ministry is likely to cut it down to a little above three percent to reflect increased uncertainties from the U.S. and Europe.”
The BOK estimates an expansion of 3.2 percent in 2013 under the administration of Park Geun Hye, who takes office in February after winning an election on Dec. 19. The central bank made that forecast in October, reducing a July prediction of 3.8 percent. In the third quarter of 2012, gross domestic product increased 1.5 percent from a year earlier, the weakest pace since 2009.
The won touched an almost two-week low of 1,076.45 per dollar against the dollar in Seoul on Dec. 24 on concern that the U.S. lawmakers won’t have enough time to agree on the budget revisions.
The consumer confidence index is based on responses from 2,032 households in 56 cities, with the survey conducted by mail and telephone between Dec. 10 and Dec. 18.
To contact the reporter on this story: Cynthia Kim in Seoul at firstname.lastname@example.org
To contact the editor responsible for this story: Paul Panckhurst at email@example.com