Bank of Korea cuts growth forecast to 2.5 percent
Bank of Korea Governor Lee Ju-yeol speaks about the decision to freeze its key rate at the bank in Seoul's Jung-gu, Thursday. Yonhap
South Korea's central bank on Thursday trimmed its economic growth outlook for the year, citing heightening economic uncertainties over trade tensions and weakening exports.
The Bank of Korea (BOK) cut 0.1 percentage point from its earlier growth estimate of 2.6 percent, which was announced in January.
South Korea's economy expanded 2.7 percent in 2018, down from a solid 3.1 percent the previous year.
The latest forecast is lower than the finance ministry's growth target of between 2.6 percent and 2.7 percent and the International Monetary Fund's 2.6-percent prediction.
The central bank also cut its inflation target to 1.1 percent this year, from an earlier 1.4 percent.
BOK Gov. Lee Ju-yeol said exports and facility investment in the first quarter of the year were slower than expected.
"Looking ahead, growth is expected to gradually rebound, helped by an expansion of fiscal spending and a modest recovery in exports and investment," Lee said.
Earlier in the day, the central bank left its key rate unchanged at 1.75 percent as South Korea's export-dependent economy is struggling with falling exports amid global trade disputes.
In a statement, the BOK said, "Domestic economic growth has moderated somewhat as consumption growth has temporarily slowed, facilities and construction investment have continued undergoing adjustments and export growth has continued to slow."
It added, "The sluggishness in employment conditions has partially lessened, with the increase in the number of persons employed having risen."
The central bank is not considering cutting the key rate, despite the downgrade in this year's economic outlook, Lee said, adding that the possibility of deflation is also "significantly low."
Meanwhile, the government is set to introduce a supplementary budget worth less than 7 trillion won (US$6.1 billion) to boost domestic demand and create jobs.
Finance Minister Hong Nam-ki told reporters that the size of the extra budget has not been confirmed yet, but he expects that the size "would not exceed 7 trillion won."
The government plans to submit an extra budget bill to the National Assembly this month, amid growing downside risks over worsening economic conditions at home and abroad. (Yonhap)