UPDATE 2-S.Korea KDI cuts 2008 growth forecast

(Recasts)

By Cheon Jong-woo

SEOUL, May 12 (Reuters) - South Korea's top research agency on Monday cut its 2008 growth forecast for Asia's fourth-largest economy and said inflation would be a 7-year high, underlining official concerns about the outlook as global momentum stumbles.

The Korea Development Institute (KDI) forecast 2008 growth at 4.8 percent, which would be the lowest since 2005, from its previous forecast of 5.0 percent. It slashed expectations for private consumption by a third.

Analysts said the downgrade in the forecast wasn't severe enough to sway the debate over how the central bank might deal with the prospects of slowing growth and strengthening inflation.

"The 4.8 percent growth is not a number which needs a rate cut, as it suggests the economy would not be that bad amid deepening concerns over a higher inflation," said Kim Jae-eun, an economist at Hana Daetoo Securities.

Equally though, the economy still faces risks, so a rate cut later in the year wasn't out of the question, Park Sang-hyun, chief economist at CJ Investment & Securities, said.

"It is unclear it will meet 4.8 percent, given higher oil prices. So, we still have a card of a rate cut on the table," he said.

South Korea's financial markets were closed for a holiday marking Buddha's birthday on Monday.