Financial thoughts

South Korea's economic growth probably will slow to less than 5 percent this year as record fuel prices restrain consumer and business spending, Vice Finance Minister Bae Kook Hwan said.

Bae's comments mark the first time a senior official has signaled that expansion in Asia's fourth-largest economy will be lower than the 5 percent pace in 2007. Finance Minister Kang Man Soo said in April that it will be “difficult'' to meet the government's 2008 economic-growth target of 6 percent.

“We're looking at economic growth of a latter 4 percent level,'' Bae said in an interview with MBN television in Seoul today. “The burden from rising oil is likely to continue through the second half, and the economy will face difficulties.''

Kang said last week that policy makers will focus on stabilizing prices, an indication the government is attempting to revive its popularity with voters who are unhappy that their spending power is being eroded by spiraling fuel and food costs. South Korea buys almost all the crude oil it uses from overseas, making it the world's fifth-largest importer of the fuel.

The government is due to release updated forecasts and policy actions for the second half in early July.

Oil prices have doubled over the past year, boosting living costs for households and hurting corporate profits. About 13,500 truck drivers stopped moving freight nationwide earlier this month to protest surging fuel costs.

South Korea's inflation accelerated to 4.9 percent in May, the fastest rate in seven years. Economic growth slowed to the weakest pace in more than a year last quarter.

The government last week approved extra budget spending of 4.9 trillion won ($4.7 billion) to help consumers and businesses cope with higher fuel costs.

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