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economic growth-Q1 outlook

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(Globalpost/GlobalPost)

SEOUL, March 14 (Yonhap) -- The South Korean economy is expected to lose ground sharply in the first quarter of 2013 due to stagnant domestic demand and slumping exports, even sinking below the 2 percent range, analysts said Thursday.

According to KDB Daewoo Securities Co., the country's gross domestic product (GDP) is likely to grow 1.6 percent on-year in the January-March period, lower than the 1.7 percent gain in 1975, when the global oil price shock dented the local economy.

Shinhan Investment Corp. and Hana Daetoo Securities Co. predicted the economy will likely grow 1.9 percent in the first quarter. Daishin Economic Research Institute forecast the on-year GDP growth will be 1.7 percent.

The Bank of Korea said in January that Asia's fourth-largest economy is expected to grow 2.8 percent in 2013, compared to the previous estimate of 3.2 percent made in October 2012.

Market watchers said the gloomy outlook came as the country's exports fell 8.6 percent in February from a year earlier due to the prolonged volatility in the foreign exchange market.

A volatile foreign exchange market, such as a steep appreciation of the won against the U.S. dollar, inflicts foreign exchange losses on exporters, which makes South Korean goods more expensive overseas.

"South Korea's domestic-oriented industries also remained stagnant as the falling exports limited their cash flows," said Kim Yoon-ki, a researcher at Daishin Economic Research Institute.

Park Sang-hyun, a researcher at Hi Investment & Securities Co., echoed the view, adding the sluggish recovery of China's imports, the country's biggest trading partner, also weighed down on the growth outlook.

The country's mounting household debt has also emerged as a drag on the Korean economy as it discourages consumer spending.

South Korea's household debt stood at 937.5 trillion won as of the end of September last year, tantamount to more than 70 percent of the country's gross domestic product for 2011.

Market watchers said the absence of government's stimulus measures to bolster the country's economy is also to blame for the negative outlook.

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