Prolonged market jitters likely to cut S. Korean economic growth: BOK chief

SEOUL, Sept. 23 (Yonhap) -- South Korea's top central banker said Friday the country's economy is likely to lose growth momentum, largely due to prolonged market jitters and weakening growth in advanced economies, hinting at cutting the bank's growth estimate for the year. The remarks by Bank of Korea (BOK) Gov. Kim Choong-soo came as a sputtering U.S. economy and the eurozone debt crisis increased economic uncertainty, amplifying volatility in global financial markets. "South Korea heavily relies on exports to advanced economies directly or indirectly," the BOK quoted Kim as saying in a forum in Washington. "If global financial uneasiness and the economic slowdowns in advanced countries persist, the growth of the Korean economy is expected to be affected considerably." Kim is on a visit to Washington to attend the annual joint general assembly of the International Monetary Fund (IMF). The BOK's economic projection for the local economy stood at 4.3 percent while the government forecast 4.5 percent growth. Other experts said those projections are overly rosy, given the rising risks to the global economy. The IMF on Tuesday lowered its outlook for Asia's fourth-largest economy to 4 percent from 4.5 percent, while jacking up inflation projection to 4.5 percent from 4.3 percent. Korean policymakers are in a dilemma as the economic growth slows amid the bleaker global outlook and inflation risks remain high. Exports account for about 50 percent of the Korean economy. "Current global financial instability is unlikely to fade soon, given the economic conditions and political situations facing advanced economies and their limited policy options," Kim noted. "The Korean financial markets showed resilience, but it cannot be excluded that market jitters will aggravate, depending on how current (global market) situations unfold." Kim said that key challenges facing the Korean economy are how to resolve household debt problems and how to promote stability in the financial system. South Korea's household debt is the main constraint on the economy as high indebtedness is feared to curb consumer spending, hurting economic growth. Household debt reached 876 trillion won (US$738.6 billion) as of the end of June. Kim said that the BOK will closely monitor household debt levels and will seek to normalize its policy stance in a bid to encourage home debt to be adjusted to a manageable level.