Korea's 2025 growth outlook to be slashed to 1.6-1.7% amid martial law crisis: BOK
The Bank of Korea in Seoul / Korea Times file
The Bank of Korea (BOK) said Monday its outlook for Korea's economic growth this year may be lowered to as low as 1.6 percent due to a political crisis sparked by suspended President Yoon Suk Yeol and weak domestic demand.
The BOK had presented 1.9 percent growth outlook for 2025 in November. The central bank said it has judged that its forecast may need to be "adjusted to 1.6-1.7 percent as of January."
"Political uncertainties sparked by the martial law imposition in December and the subsequent impact on the economic sentiment are presumed to cause this year's growth outlook to be slashed by around 0.2 percentage point," the BOK said in a report.
The central bank is scheduled to officially announce its revised outlook in February.
"The February figure will depend on the timing of political uncertainties being eased, the government's supportive measures and economic policies of the new U.S. administration," the report read.
The finance ministry earlier forecast the economy to grow 1.8 percent in 2025, pointing to heightened uncertainties at home and abroad.
Korea's potential growth rate is at 2 percent, and this year may mark the first time ever that the country's yearly growth rate falls below the level.
Last week, the BOK kept its benchmark interest rate frozen at 3 percent to shore up the weak local currency amid political chaos, also assuming a wait-and-see mode ahead of the launch of the second Donald Trump administration.
BOK Gov. Rhee Chang-yong, however, told a press briefing that the on-hold decision was a tough call given weak growth momentum, and all the board members voiced a need to keep open the possibility of further rate reductions in the next three months.
In December, the National Assembly voted to impeach Yoon pending a final court ruling for his shocking, albeit short-lived, martial law imposition.
Yoon was formally arrested Saturday as an extensive probe has been under way into the incident. (Yonhap)