Roundup: S.Korea's central bank lowers 2016 growth outlook amid calls for rate cut

South Korea's central bank on Tuesday lowered its 2016 growth forecast for the economy to 2.8 percent from an earlier estimate of 3 percent amid calls for further rate cuts caused by growing downward pressures from at home and aboard.

Bank of Korea (BOK) revised down its headline inflation outlook from 1.4 percent to 1.2 percent after freezing its benchmark interest rate at an all-time low of 1.5 percent for 10 straight months.

The downward revisions are expected to boost calls for more accommodative monetary policy and fiscal stimulus as it came in the midst of dismal outlooks by local economic think tanks and international agencies.

Last week, the private Hyundai Research Institute downgraded its growth forecast from 2.8 percent to 2.5 percent. LG Economic Research Institute lowered its outlook from 2.5 percent to 2.4 percent, while the Korea Institute of Finance cut it from 3.0 percent to 2.6 percent.

The downgrade domino came after the International Monetary Fund (IMF) slashed South Korea's 2016 growth outlook from 3.2 percent to 2.7 percent. The Asia Development Bank (ADB) cut its outlook from 3.3 percent to 2.6 percent in late March.

South Korean Finance Minister Yoo Il-ho had expected the ministry's target of 3.1 percent growth to be achieved this year, but there is no think tank found forecasting over 3 percent of growth, except the state-run Korea Development Institute (KDI) predicting a 3.0 percent economic expansion.

The Organization for Economic Cooperation and Development (OECD) set its growth outlook for South Korea at 3.1 percent, but the figure announced in November last year is expected to be revised down in the near future.

South Korea's economy expanded 2.6 percent in 2015, tumbling from a 3.3 percent growth in 2014.

Pessimistic forecasts over South Korea's economy were mainly attributable to delayed global recovery. South Korea's exports, which account for about half of the economy, tumbled 18.9 percent in January on a yearly basis, before posting falls of 12.2 percent in February and 8.2 percent in March respectively.

Record-breaking household debts discouraged consumers from spending money. Worsening labor market conditions also weakened private consumption.

Jobless rate for those under 30 reached 11.8 percent in March, higher than any March figures. In February, the youth unemployment rate hit a record high of 12.5 percent.

Expected export fall and soft consumer spending in South Korea would highly likely boost expectations for further interest rate cuts and fiscal stimulus such as supplementary budget plan.

BOK Governor Lee Ju-yeol expressed his reservations about additional rate cut effect, saying that the interest rate policy effect will be limited when uncertainties are running high in the financial markets at home and abroad.

Lee, however, opened a door for further rate cuts, noting that monetary policy should be in tandem with fiscal policy and corporate structuring.

"We believe that actual monetary easing will materialize in the form of a policy mix as Governor Lee highlighted today," said Kwon Young-Sun, a Hong Kong-based economist at Nomura International.

The economist expected the finance ministry's announcement of extra budget plan as early as in June and the BOK's rate cut in July and October by 25 basis points each to 1 percent. Enditem