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South Korea Says Economic Growth to Slow to 3.7% Next Year

Dec. 12 (Bloomberg) -- South Korea’s economy will grow at the slowest pace in three years in 2012 as the European debt crisis and global economic weakness cripple exports.

Gross domestic product growth will slow to 3.7 percent next year from 3.8 percent this year and 6.2 percent last year, the nation’s finance ministry said in an e-mailed statement today. The Bank of Korea projected the same growth rate for 2012 on Dec. 9, cutting its July forecast of 4.6 percent.

The central bank refrained from raising interest rates last week for a sixth straight month as deepening European debt woes prompted monetary easing in countries from Australia to China.

“Our policy priority for next year is to stimulate the economy and improve the living quality of the people,” the statement said. “We will also focus on preempting potential difficulties from global uncertainties and increasing volatilities as the European financial crisis spreads.”

Exports, equivalent to half of the economy, will increase 7.4 percent next year, down from a 19.2 percent jump this year, trimming the current-account surplus to $16 billion from $25 billion, the ministry said. Inflation may run at 3.2 percent in 2012 after a 4 percent rate this year, the ministry also said.

The Organization for Economic Cooperation and Development last month cut its 2012 growth forecast for its 34 member countries to 1.6 percent from 2.8 percent predicted in May. The Paris-based organization projected South Korea’s expansion at 3.8 percent in 2012, compared with 2 percent growth for Japan and an 8.5 percent gain for China.

South Korea will create more 280,000 jobs next year after an addition of 400,000 jobs this year, the ministry said today. The government will spend about 60 percent of its 2012 budget in the first half to spur domestic demand, it said.

To contact the reporter on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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