Consumer prices are expected to rise steeply, and Korea will likely post its first-ever current account deficit in 11 years, the BOK said in its economic forecast report released Wednesday.

The BOK's 4.7 percent growth projection is lower than the 5.0 percent to 5.1 percent forecasts made by the state-run Korea Development Institute and private economic think tanks, including Samsung Economic Research Institute.

Korea’s economic growth rate has been falling steadily since recording 5.0 percent in 2006, raising worries that the economy is on the decline already, suffering continued low growth even before Korea becomes an economically advanced nation.

Kim Jae-chun, head of the BOK's research department, said external conditions next year will pose more uncertainties than ever, due to a slowdown in the U.S. economy, high oil prices, and a correction in China’s overheated economy.

Consumer prices are also an area of major concern for next year. The BOK said consumer prices could rise 3.3 percent, much higher than this year's 2.5 percent. That projection is higher than the 2.7 percent to 3.0 percent inflation forecast by state-run and private economic think tanks.

Consumer prices will likely surge 3.5 percent in the first half of next year, as the impact of soaring oil prices spreads throughout the world’s economies in earnest and when service sector fees, including tuitions, are hiked, the BOK said.

The central bank said Korea will post a current account deficit of around US$3 billion in 2008, the first dip into the red since 1997 when the country posted a W8.3 billion (US$1=W923) deficit. The main culprits are soaring oil prices and increased spending overseas by Koreans, the BOK said.

Meanwhile, Lee Yoon-ho, vice chairman of the Federation of Korean Industries, told reporters Tuesday that it would be difficult for Korea’s economy to expand in the 5 percent range next year due to a possible slowdown in the global economy, as well as worries posed by an independent counsel's probe into the Samsung slush fund scandal.

Lee said there is a strong possibility that the global economic boom could end next year, while Korea’s economic growth potential was falling, making 5 percent growth difficult.

Lee said there are two worrying factors that cannot be ignored: the fact that Korea’s potential economic growth has been dropping since the Asian financial crisis, showing no signs of rebounding, and a dent in Korea’s international credibility and uncertainties posed by the Samsung probe.

Lee said the task of the next administration would be to stimulate the economy and create more jobs, while investments would play a pivotal role. The creation of a business-friendly environment is absolutely necessary to stimulate more corporate investment, he added.

(englishnews@chosun.com )