Standard Chartered lowers S. Korea's growth forecast to 3.5 pct

SEOUL, Sept. 18 (Yonhap) -- Standard Chartered Bank lowered South Korea's growth forecast for this year to 3.5 percent, mainly due to a surge in household loans, the local affiliate of the international financial group said Sunday. The prediction released by Standard Chartered First Bank Korea Ltd. showed the growth rate being downgraded 0.4 percentage point from 3.9 percent, with the forecast for next year also falling from 4.8 percent to 4.0 percent. "The cut in numbers reflects growing downside risks that are expected to exert negative pressure," the bank said. The lender, however, said that South Korea's economy would not face a sharp slowdown or experience a so-called double dip. The bank said the main source of concern for Asia's fourth largest economy was its ballooning household debt that could hurt domestic spending. Household debt could also raise worries over the country's credit health, possibly derailing long-term economic stability. "There is a need for authorities to closely monitor developments related to household debt and to set policies accordingly," the financial institution said. On inflationary pressure, Standard Chartered said the country's consumer prices may move up 4.2 percent for the whole of 2011, up from an earlier estimate of 4.0 percent. The increase reflects a rise in crude oil prices and steep hikes in housing-related spending like rent, which is expected to be a source of woes even into the next year. The bank, meanwhile, estimated that the Bank of Korea (BOK) would maintain its current stance on not marking up key interest rates for the rest of the year, but may opt to do so in the first quarter of 2012. The BOK held the benchmark seven-day repo rate steady at 3.25 percent for September, marking the third month in a row that numbers have remained unchanged.