South Korea revised downward its growth outlook to 4.5 percent for this year as higher-than-expected energy prices and lingering global uncertainties remain a drag on the nation's economy, the finance ministry said Thursday.

   The projection is lower than the 5 percent expansion predicted last December, when the government unveiled its annual economy-management plan.

   "Recovery in advanced nations slowed slightly and domestic demand also remained slower than expected," Yoon Jong-won, head of the finance ministry's economic policy bureau, told reporters in a briefing on the government's second-half economic management plan.

   The downward revision has long been expected as many other think tanks have already lowered their outlooks for Asia's fourth-largest economy. Most of them predict 4-4.5 percent growth for this year.

   The downgrade is based on updated forecasts of oil prices, a major factor for its economic activity as the nation imports almost all crude for its energy needs.

   The average import prices of crude were predicted to stay at US$105-110 per barrel this year, up from its previous outlook of $85.

   The ministry still expected that Korea's economic recovery will accelerate down the road by predicting 5 percent growth in the second half of this year. In the first half, the economy was estimated to have grown 3.9 percent.

   "The growth rate will be higher in the second half as the negative impact from such factors as worsened climate conditions, the outbreaks of foot-and-mouth disease and surging oil prices during the first half will likely abate," the ministry said.

   The ministry expected the economy to grow nearly 5 percent for 2012 as economic conditions at home and abroad will likely improve further.

   Inflation, however, remains a key risk factor as higher oil and commodity prices are driving up production costs and consumer goods prices here.

   The ministry revised up consumer price growth for this year to 4 percent from its earlier forecast of 3 percent. Next year, prices will likely stabilize at around 3 percent, it noted.

   Price stability remains a top priority for the government, which worries that runaway inflation could weigh on economic growth by dampening consumer spending.

   South Korea's consumer prices jumped 4.1 percent in May from a year earlier, staying above 4 percent for the fifth straight month.

   Meanwhile, the ministry painted a relatively rosy picture of the nation's employment market, revising upward its job creation projection for this year from 280,000 to 330,000.

   It kept its outlook for current account surplus unchanged at US$16 billion. For 2012, the ministry expected that the surplus will decline to $10 billion.

Source: Yonhap News (June 30, 2011)