The South Korean economy would be dominated by downside risk factors rather than upside factors, the central bank said Friday.
"Our economy will show a long-term trend rate of growth down the road, but in terms of upside and downside risks to the future growth path, the downside will dominate over the upside given Europe's sovereign debt crisis," the Bank of Korea (BOK) said in a report assessing current economic developments after the November monetary policy meeting.
The BOK left the 7-day repo rate unchanged at 3.25 percent this month, keeping its rate freeze stance for the fifth consecutive month.
The central bank said in a separate statement that the global economy would recover at a moderate pace down the road even though advanced nations showed signs of sluggishness.
The bank, however, noted that downside risks to growth remained large due to the European debt crisis, the slump in major economies and the likely persisting turmoil in global financial markets.
Touching on inflation, the BOK said the country's consumer price growth was seen to slow down due to declines in agricultural product prices, but core inflation was forecast to sustain its upward trend, driven by high inflation expectations.
The nation's consumer prices rose 3.9 percent in October from a year earlier, down from a 4.3 percent on-year gain in September. This was the first time this year that the headline inflation fell below the upper ceiling of the BOK's inflation target band of 2-4 percent. Core inflation, which excludes volatile agricultural and petroleum prices, advanced 3.7 percent last month, down from 3.9 percent tallied in the previous month.