South Korea is forecast to grow at a slower-than-expected rate of 4.2 percent this year due to weak private consumption stemming from mounting household debts, a market expert said Friday.

   "We were expecting a gross domestic product (GDP) of 4.7 percent but revised it lower as household consumption still remains weak given the pace of job growth," Tim Condon, head of ING Financial Markets Research in Asia, told press in a meeting.

   South Korea's economic growth slowed to 0.9 percent on-quarter in the second quarter from 1.3 percent on-quarter the previous quarter.

   The government hinted early this month at lowering the growth target for the year, citing persistent downward risks. The government is targeting a growth rate of 4.5 percent for the year.

   Condon pointed to the mounting household debts in Korea as a reason for a slow growth, saying "borrowing absorbs too much of their income, increasing vulnerability."

   Ballooning household debt has emerged as a major drag on the economy. As of the end of June, the country's household debt reached 876.3 trillion won (US$825.1 billion) due to a long streak of low rates and the economic recovery.

   Korea is in a much healthier state today as opposed to the fluctuating global economy, he said. "The current situation in Korea is 'boring', and boring is good for investors," the economist said.

   As for monetary policy, Condon forecast the central bank would keep its base rate unchanged at 3.25 percent, as global oil prices seemed to peak in April, which would likely pull down inflation.

Source: Yonhap News (Sept. 16, 2011)