ADB Lowers Growth Forecast for Korea over Interest Rate Hikes

The Asian Development Bank has slashed its outlook for Korea's economic growth this year to 2.6 percent from its earlier forecast of 3 percent, made in April.

In its latest report released on Thursday, the ADB also forecast the same growth rate of 2.6 percent for next year. It said that Korea's economy will be affected by agressive rate hikes across the world.

"The economic impact of the pandemic has declined across most of Asia, but we're far from a full and sustained recovery. On top of the slowdown in the PRC, fallout from the war in Ukraine has added to inflationary pressure that's causing central banks around the world to raise interest rates, acting as a brake on growth," ADB chief economist Albert Park said.

The bank also sharply raised its inflation outlook for Korea this year to 4.5 percent from its earlier forecast of 3.2 percent. Next year, it sees inflation falling to 2 percent in the first half and rising slightly to 3 percent in the latter half. In its analysis, it said that "inflationary pressures will stifle private consumption growth" in the country.

Looking at Asia as a whole, the ADB lowered its growth forecast for this year for 46 developing countries in the region to 4.6 percent.