South Korea’s central bank yesterday cut the country’s growth outlook and kept the key interest rate unchanged at a record low as exports sputters and demand slumps.
The Bank of Korea said it expects the economy to expand 2.7 percent this year, just three months after cutting its forecast to 2.8 percent.
It also left borrowing costs unchanged at 1.25 percent as it looks to assess the effects of last month’s reduction — which was the first in a year — as well as newly announced stimulus measures.
Britain’s decision to leave the EU last month added to uncertainty for the South’s export prospects, Bank of Korea Governor Lee Ju-yeol said.
“We believe that growing uncertainty [caused by the British vote] may slow growth of the global economy and trade and eventually impact our economy,” Lee told reporters.
The South Korean Ministry of Finance last month cut its own growth outlook from 3.1 percent to 2.8 percent following the British referendum result and unveiled a 20 trillion won (US$17 billion) stimulus package.
The South’s economy expanded 2.6 percent last year — the lowest since 2012.
Yesterday’s revision on the growth outlook came as Asia’s fourth-largest economy struggles with increasing unemployment, mounting consumer debts and falling exports.
Exports, which account for nearly half of the country’s economy, have fallen for 18 straight months after last month’s overseas shipments fell 2.7 percent from the previous year.
Total household debts had snowballed to more than US$1 trillion as of late March, while wages have stagnated and housing prices have continue to rise.
Lee also raised concern over the effect of Seoul’s new anti-corruption law on domestic spending after it takes effect in September.
“Since the law covers a far wider industries and slaps far harsher punishment than before, we believe that it would ... certainly affect certain industries and overall consumer spending,” he said.
Potential effects of the anti-corruption laws played a role in the downward revision of the bank’s growth outlook, Lee said.
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