Goldman Sachs’ new report, titled Asia Economics Analyst Korea, predicts that the Bank of Korea (BOK) will lower its interest rate by about 0.25 percent in Q2 of this year when BOK’s new Minister steps into office in March. Goldman Sachs has been emphasizing the necessity of lowering interest rates for some time, which has been viewed as a controversial stance. Thus, this announcement is bound to further fuel the controversy.
According to the report, there is the possibility that Korea’s interest rate will rise to 2 percent, triggering this response. Also, the report includes the prediction that tax revenue will end up being short about 3 trillion won (US$2.7 billion), due to a lower-than-expected price index.
The report said that a combination of these factors, the government’s automatic spending cuts, and a lack of economic growth momentum would lead to a downturn.