The South Korean economy is likely to expand at a slower pace than expected this year due to the negative impact of the Japanese currency's depreciation on its overseas shipments, Goldman Sachs said Friday.
In its latest forecast, the global investment bank said Asia's fourth-largest economy will likely grow 3.1 percent this year, down from its earlier estimate of 3.4 percent made in December.
Kwon Goo-hoon, the managing director and co-head of research at Goldman Sachs Asia, attributed the lower growth forecast to negative impact from the rapid depreciation of the Japanese yen, which has weighed down local exporters.
"Given the current level of yen weakness, we adjusted the growth estimate for Korea," he told reporters in Seoul.
Goldman Sachs projected the streak of a strong Korean won will likely continue through this year, further appreciating against the U.S. dollar to 1,030 won toward the end of the year from the current level of around 1,060 won, although it may briefly fall in the first quarter.
The local currency will likely stay strong against the yen this year, at an average of 1,060 won, compared with 1,127 won in 2012, the investment bank said.