Roundup: S.Korean gov't sets 2018 growth forecast at 3 pct

SEOUL, Dec. 27 (Xinhua) -- South Korea's government on Wednesday set its 2018 growth forecast for the economy at 3 percent, lower than the 2017 growth outlook on expectations for uncertainties such as interest rate hike and lackluster labor market conditions.

Real gross domestic product (GDP), adjusted for inflation, was predicted to grow 3 percent in 2018, the Ministry of Strategy and Finance said in its 2018 economic policy direction report.

It would be a higher growth rate compared with the figures tallied between 2012 and 2016, which stayed below 3 percent, but it was down from the ministry's 2017 growth outlook of 3.2 percent.

President Moon Jae-in told a meeting with economy-related ministers that it would be a good thing for the growth rate to surpass 3 percent, but he expressed worry about the still high jobless rate especially among youths, massive household debts and living difficulties among the general public.

Moon said job creation would be the first thing that ordinary South Koreans could feel when economic situations get better, reiterating his top policy priority would be placed on creating decent jobs next year, especially for the younger generation.

The ministry said uncertainty would remain over the economy as the central bank was expected to raise the policy rate further next year.

The Bank of Korea (BOK) raised its benchmark interest rate in late November to 1.5 percent from an all-time low of 1.25 percent, marking the first rate increase in almost six and a half years.

The tightened monetary policy was projected to help reduce massive household debts, which had rapidly risen in recent years amid strong demand to purchase new home with borrowed money.

The higher borrowing costs, however, would increase debt-service burden for households, which can lead to weaker private consumption.

The U.S. Federal Reserve lifted its policy rate to a range of 1.25-1.50 percent, of which the upper end was identical to South Korea's benchmark rate. It would put pressure on the BOK to raise its benchmark rate further next year.

Private consumption was forecast to grow 2.8 percent in 2018 on expectations that the government's income-based growth policy would increase the purchasing power of households. It was higher than the expected growth rate of 2.4 percent in private spending for this year.

The income-based growth policy was aimed at creating decent jobs and narrowing gap in salary between regular and irregular workers. It was expected to expand disposable income among households, bolstering money spending among consumers.

Outlook for facility investment growth was set at 3.3 percent in 2018. Corporate earnings were forecast to improve next year on global economic recovery, but normalized monetary policy in major economies and protectionist move would serve as negative factors, the ministry said.

Exports, which account for about half of the economy, was forecast to rise 4 percent in 2018. Demand for locally-made semiconductors, automobiles and oil products would be strong next year, but the high growth rate of exports this year would pull down next year's growth rate. It is called a high base effect.

Outlook for the 2018 consumer price inflation was set at an annualized rate of 1.7 percent as global crude oil price was expected to rise at a slower pace next year than this year. It was lower than this year's headline inflation outlook at 1.9 percent. Enditem