By Kim Jae-kyoung
Staff Reporter

The Organization for Economic Cooperation and Development (OECD) cut its forecast for South Korea’s economic growth this year to 4.3 percent from 4.5 percent, citing a slowdown in exports.

In its latest report on the world economic outlook, the OECD said that exports growth will fall to 9.8 percent this year, down from the previous year’s 19.7 percent. Exports have been the sole engine of growth for the nation over the past few years.

In contrast, the global organization forecast private spending to grow 2.6 percent this year, a turnaround from the 0.5 percent contraction a year ago.

The organization for a group of economically advanced nations maintained its growth forecast for 2006 at 5 percent.

The OECD suggests that in order to boost a recovery in domestic demand, Korea should focus on structural reform to address the structural causes of weak domestic demand, notably debt delinquency and problems that discourage business investment.

``The monetary policy should maintain its expansionary stance until domestic demand recovers, while the appreciation of the won should be allowed to continue in line with the country’s flexible exchange rate policy,’’ it said.

``The recently announced comprehensive investment plan, which is intended to boost demand, should aim at promoting economic efficiency,’’ it added.

The OECD’s revised 2005 growth forecast is well below the government’s target of 5 percent growth. Despite a lower-than-expected first quarter growth of 2.7 percent, the government said that it will not change its growth goal.

kjk@koreatimes.co.kr