The London-based global banking giant, HSBC, offered a rather gloomy outlook for South Korea's economy Tuesday, expecting the country's central bank to trim its policy rate during the second quarter.
HSBC forecast that Asia's fourth-largest economy will grow 2.2 percent on-year in 2016, the lowest growth outlook for the local economy offered by global and domestic institutes so far.
It was the first time the British banking group offered an annual growth outlook for the South Korean economy, but it joined many other major institutes that have offered a gloomy outlook for the local economy.
In April, the International Monetary Fund slashed its growth outlook for the South Korean economy to 2.7 percent from 3.2 percent three months earlier. The Bank of Korea too has revised down its 2016 growth outlook to 2.8 percent, down 0.2 percentage point from the 3 percent it forecast in January.
In a press briefing here, Frederic Neumann, managing director of HSBC's Asian Economic Research, cited worsening economic conditions at home and abroad as factors hindering growth.
South Korea's exports have fallen every single month since the start of last year amid a slowing growth in China, the world's single largest importer of South Korean goods.
Domestic consumption, one of two major pillars of growth, has also remained sluggish following the outbreak of Middle East Respiratory Syndrome in May 2015 that claimed 38 lives here.
Luckily, the South Korean central bank still had room for quantitative easing, Neumann insisted, a claim previously acknowledged by the Bank of Korea (BOK) itself.
However, the South Korean central bank has remained reluctant to further boost market liquidity as a way of bolstering growth, often citing dangers associated with mounting household debts.
The BOK's monetary policy board has kept its key rate frozen at 1.5 percent after sending it to the record low level in June 2015. The country's household borrowing still skyrocketed to a record high of 1,207 trillion won (US$1.06 trillion) as of end-2015.
Neumann maintained the BOK will likely send its policy rate to a new low of 1.25 percent before the end of the second quarter.
The monetary policy board is scheduled to hold a new rate-setting meeting next Friday, and then on June 9. (Yonhap)