The Bank of Korea lowered its domestic economic growth forecast for this year from 2.6 percent to 2.5 percent and maintained the benchmark interest rate at 1.75 percent. This has to do with less-than-expected consumption and investment and deteriorating export conditions for major items including semiconductors.
Bank of Korea Governor Lee Ju-yeol made the announcement immediately after this month’s Monetary Policy Committee meeting on April 18. “We found that the first quarter’s export and investment conditions fell short of previous expectations and adjusted the domestic economic growth forecast based on the determination,” he explained.
The central bank lowered its private consumption growth forecast from 2.6 percent to 2.5 percent and cut its capital expenditure growth forecast from 2 percent to 0.4 percent. Likewise, it adjusted its inflation and current account surplus forecasts from 1.4 percent to 1.1 percent and from US$69 billion to US$66.5 billion, respectively. The central bank said that the economic growth forecast does not reflect the six trillion won supplementary budget the South Korean government is currently working on.
In addition, the Bank of Korea deleted the phrase of additional adjustment of the degree of easing in its monetary policy statement. In other words, it declared an end of monetary tightening. Also, the governor reconfirmed that the central bank is not going to cut the benchmark rate in the near future. In short, the bank is likely to neither raise nor lower the key rate for a while.