The Bank of Korea expects the domestic economy to grow 3.8 percent this year, down zero.2 percentage points from its earlier forecast.
It also cut its growth forecast for next year to 4 percent from 4.2 percent.
Giving out a new growth outlook on Thursday the central bank said the revision is due to sluggish domestic demand brought on by the ferry disaster in April.
Although the new forecast indicates a slowdown in the pace of recovery, the bank said that it does not indicate a radical change in the bank's view that the overall domestic economy remains on a recovery track.
But it did open up the possibility of a rate cut down the road.
"This 3.8 percent growth is still matching up with the nation's potential growth rate. But the concern now is that there are bigger downside risks than upward potential."
( 3.8 . , , .. ..)
The downside risk, the central bank says, is again, coming largely from the ferry tragedy as well as the strengthening local currency trend.
"We still can't rule out the possibility that the worsened economic sentiment due to the disaster will go on for a longer period of time."
The central bank has been under pressure for a rate cut as finance minister-nominee Choi Kyoung-hwan urged the bank to seek easier monetary policies to spur growth.
For this month, the central bank kept the key rate steady at 2-and-a-half percent for the fourteenth straight month.
"While the central bank is taking a wait-and-see approach for the time being, some market analysts expect that a rate cut could come as early as next month.
Hwang Ji-hye, Arirang News."