May 29, 2020 11:10
The Bank of Korea on Thursday slashed the base interest rate to a record-low 0.5 percent on expectations that the country's economy will shrink for the first time in 22 years.
The BOK in a monetary policy meeting shaved another quarter-percent off the base rate and lowered its economic growth projection for Korea this year from 2.1 percent to -0.2 percent.
Not only has private consumption been weakened by the coronavirus epidemic, but exports have been hit hard by the global economic slump.
Since the BOK began tallying economic data on Korea back in 1953, the economy shrank only twice before -- in 1980 (-1.6 percent) and in 1998 (-5.1 percent). But the BOK expects the economy to grow again by 3.1 percent next year.
Kim So-young at Seoul National University said, "Considering that coronavirus infections still surge sporadically in the country, even a 0.2 percent contraction is optimistic. If another variable erupts before the epidemic eases, such as a financial crisis in an emerging country, a rebound seems unlikely."
BOK Governor Lee Ju-yeol told reporters that the projection "is based on the assumption that the epidemic will peak globally in the second quarter and gradually ease without a second wave of infections in Korea."
"Assuming a pessimistic scenario of a major resurgence in infections, the decline will be more pronounced," Lee warned. In that event the BOK forecast that the economy could shrink 1.8 percent.
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