Major foreign investment banks slashed their growth projections for the South Korean economy next year to an average of 3.8 percent, saying the global economic slowdown will hit the country’s export growth, data showed Wednesday.

The growth outlook was downgraded from an average of 3.9 percent estimated in October by 10 foreign investment banks including Barclays Capital, according to data compiled by the Korea Center for International Finance.

UBS AG gave the lowest projection of an estimated 2.8 percent growth for Asia’s fourth-largest economy, data showed.

The downward revision came amid growing prospects that exports, which account for about 50 percent of the economic output, will lose ground because of the slowing global economy.

Consumer spending and capital spending are likely to be weaker than expected as high inflation will eat into Koreans’ spending and companies will likely delay heavy facility investment due to economic uncertainty.

The projection is lower than a growth forecast made by the Bank of Korea, South Korea’s central bank. BOK governor Kim Choong-soo earlier said the Korean economy is expected to grow at the low-4 percent range in 2012, slowing from the bank’s previous estimate of 4.6 percent. The central bank also said the economy will likely miss its previous growth estimate of 4.3 percent this year.

In the third quarter, the Korean economy grew 0.7 percent from three months ago, slowing from a 0.9 percent expansion tallied in the second quarter, mainly on weaker consumer spending and faltering facility investment.

Analysts said that the slowing momentum of the economy will likely prompt the BOK to stand pat on the rate for a while.

Four out of five foreign investment banks forecast that the BOK will likely freeze the key rate at 3.25 percent at least until the first half of next year due to economic uncertainty. Only British banking group HSBC penciled in two rate hikes in the first and second quarter of 2012.

The BOK left the key rate unchanged for the fourth straight month in October despite nagging concerns about inflation as the eurozone debt crisis and dimmer global outlooks heightened economic uncertainty. 

(Yonhap News)