S.Korea warns of slowdown, vows to lift investment

SEOUL (Reuters) - South Korea warned on Monday its economy has probably passed its peak and was in an early stage of downturn, and vowed to boost domestic investment by removing as many regulations as possible and to expand fiscal spending.

The view on Asia's fourth-largest economy and measures to boost investment were contained in a statement issued as President Lee Myung-bak, now in his third month in office, was holding a meeting with business leaders.

Following are main parts of the statement, distributed to reporters by the Finance Ministry on behalf of all economy-related ministries and compiled by Reuters:

* Recent economic indicators show the South Korean economy has passed the peak and was entering into a phase of downturn.

* Consumer price growth to reach around 3.5 percent in all of this year, above an earlier expectation of 3.3 percent, although international raw materials prices will likely stabilise a little bit in the second half of the year.

* The current account deficit expected to reach between $7 billion and $10 billion in all of this year.

* Annual job growth feared to fall sharply below the 280,000 jobs added last year.

* The Bank of Korea to manage interest rate flexibility while considering inflation factors, overseas economy, domestic economy and capital flows related to the widening interest rate differential with foreign countries.

* The government to manage fiscal policy in a neutral way while fiscal policy was on a tightening bias last year.