Seoul: The Bank of Korea (BOK) on Thursday lowered its outlook for South Korea’s economic growth next year to 1.9 percent, pointing to a slower-than-expected export growth amid growing concerns over potential changes in the trade policies of the United States and other major economies.
According to Yonhap News Agency, the latest figure marks a 0.2 percentage-point fall from its projection presented in August and also comes below the country’s potential growth rate of 2 percent. Presenting such a bleak outlook and stressing the need to spur growth, the BOK unexpectedly slashed its key rate by a quarter percentage point to 3 percent on Thursday.
“The growth forecasts for this year and next year have been revised downward by 0.2 percentage point each in light of slower-than-expected export growth due to intensifying competition with major countries in key industries and strengthening trade protectionism, amid domestic demand recovering at a moderate pace,” the BOK said in a report. The BOK also trimmed the gro
wth forecast for this year to 2.2 percent from 2.4 percent. The gross domestic product (GDP) expanded 0.1 percent on-quarter in the third quarter, lower than market expectations.
As for inflation, the BOK lowered its forecast for 2024 to 2.3 percent from its earlier projection of 2.5 percent, and its estimate for next year by 0.2 percentage point to 1.9 percent. In its latest report released last week, the International Monetary Fund (IMF) forecast the South Korean economy to grow 2.2 percent this year and 2 percent in 2025. Earlier, the finance ministry presented a 2.6 percent expansion this year for Asia’s fourth-largest economy and 2.2 percent growth for 2025. The ministry is expected to release its newest projections in December.
Should global trade conflicts intensify due to the possible implementation of sweeping tariffs and other protectionist measures by the second Donald Trump administration and corresponding measures by other major economies, South Korea’s economic growth in 2025 may further slide
to 1.7 percent, the BOK noted. Trump has vowed to impose “universal baseline tariffs” of minimum 10 percent on all imported goods and raise tariffs on imports from China to as high as 60 percent.
South Korea’s exports rose 4.6 percent from a year earlier to US$57.5 billion in October, marking the 13th straight monthly gain, but it was the smallest increase since March, according to government data. South Korea is also grappling with weak private consumption and investment due mainly to high borrowing costs over an extended period of time and various systemic factors.
Retail sales, a gauge of private spending, dropped 0.4 percent in September from the previous month. On an on-year basis, retail sales sank 2.2 percent, the seventh straight monthly fall. Industrial production fell 0.3 percent in September on-month. In on-year terms, factory output went down 1.1 percent, government data showed.