KDI: Korea's growth outlook expected at 3.7%Updated: 2014-05-28 10:08:18 KST
A drop in private consumption is the main culprit that brought down the Korea Development Institute's growth forecast this year.
This comes as consumers have been spending less since the Sewol-ho ferry disaster last month.
Although the think tank did not see this as a long-term risk the slow consumption pulled down the country's 2014 economic growth forecast to 3.7 percent.
Numberwise, it's the same figure from its last projection.
But given its recent adjustment in its GDP calculation, this reflects a drop of point-2 percent.
Not only dull consumption but also growth forecasts in facility investment and spending in the construction were revised down.
And against this backdrop, the KDI added that the country needs to allow a slight fiscal deficit for now, given the consumption slowdown and called on the Bank of Korea to hold the key rate
saying it may be too premature to tighten the money flow.
And it looks like worries over the ferry disaster's impact on domestic spending are resonating in the central bank as well.
The May minutes from the Bank of Korea show some committee members did raise views that the ferry disaster may crimp spending and investment in the country.
Kwon Soa, Arirang News.
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