Feb. 7 (Bloomberg) -- South Korea’s economy faces “downside risks” and may grow more slowly in the first half than its long-term trend, the Bank of Korea said.

Price pressures will likely persist on elevated inflation expectations and unstable oil costs, the central bank also said in a report to the National Assembly today. Consumer price gains moderated to 3.4 percent in January largely due to a high year- earlier base, it said.

Growth may gradually pick up pace in the second half of this year on improving global conditions, the Bank of Korea said. Policy makers have kept benchmark interest rates unchanged after three increases in the first half of 2011, largely due to risks from Europe’s debt crisis, a slowdown in major economies, and global financial market instability, the central bank said.

External uncertainty, weak consumer and business sentiment, and high household debt are weighing on growth, and downside risks are greater than upside risks, the central bank said.

South Korea’s economy grew 3.6 percent in 2011.

--Editors: Paul Panckhurst, Lily Nonomiya

To contact the reporters on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net;

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net