S. Korea C. Bank sees output gap extended through 2014

SEOUL (Reuters): South Korea’s negative output gap will persist through 2014 due to downside risks to the economy, the country’s central bank said in a biannual report on price inflation released on Thursday.

The output gap is the difference between an economy’s actual output and the output it could achieve at full capacity.

“In (South Korea’s) growth path we see downside risks outweighing the upside due to the chance of more dull growth in the euro zone and fiscal austerity measures in the U.S.,” the Bank of Korea said in the report.

The central bank said the output gap in Asia’s fourth largest economy would start to narrow from the second half of 2013.

It also reiterated that it would focus monetary policy on supporting the economy while stabilising prices.