(MENAFN - Qatar News Agency) South Korea's potential growth rate is estimated at around 3.8 percent following the global financial crisis and the Eurozone debt crisis, Bank of Korea (BOK) Governor Kim Choong-soo said.
South Korea's potential growth rate, or the maximum possible rate at which an economy can grow without triggering inflation, reached around 6.1 percent between 1991 and 2000 and has largely continued to decline, affected by the global financial crisis. The Governor told reporters that the country's economic momentum is weakening, saying that it is critical to enhance productivity of the service sector in boosting the potential growth.
South Korea's central bank has not officially announced the potential growth rate since 2005. His remarks came as the BOK cut the key interest rate and its 2012 and 2013 growth outlook on Thursday in the face of the protracted Eurozone debt crisis and China's slowdown.
The BOK's 2012 and 2013 growth estimates were lowered to 2.4 percent and 3.2 percent, respectively. The BOK said the local economy is likely to lag behind its long-term potential growth trend for a considerable period of time, indicating soft growth momentum and easing inflationary pressure.
The protracted economic recovery usually crimps facility investment, causing the underlying trend of the potential growth rate to fall. Kim downplayed chances of a "currency war," following unconventional monetary easing by major central banks, but expressed concerns about excessive volatility stemming from capital inflows.