South Korea's central bank said on Thursday it expects this year's GDP growth to be lower than the previous May forecast of negative point-two percent, with the pace of domestic recovery of consumption and exports forecast to be slower than previously thought.
"With the global spread of COVID-19 accelerating even into July, the revision to May's GDP growth forecast was inevitable. The recovery of exports is slower than previously thought, and this might slow down the pace of the overall economic recovery."
The central bank explained that while the slump in private consumption has eased, the decline in exports has worsened, especially in sectors not related to IT.
It said the future economic outlook will heavily depend on how the COVID-19 situation unfolds, with consumer price inflation expected to remain near zero percent for some time.
Amid the sluggish economy, the Bank of Korea's monetary policy board unanimously decided to keep its benchmark interest rate steady at zero.five percent.
The rate freeze comes a little less than two months after the bank slashed its key interest rate to the historic low of zero.five percent in late May, and about four months since it lowered the rate to zero.seven-five percent in mid-March.
One expert says that as any additional rate cut could overheat the already red-hot real estate market, the Bank of Korea will likely maintain the status quo for the near future.
"I expect the BOK to keep interest rates at point-five percent for the next few months. With high uncertainty caused by the pandemic, it's best to maintain its current stance while monitoring the effects of the third extra budget on the economy."
"The Bank of Korea governor also said the bank will maintain its accommodative monetary policy, while closely monitoring the financial market and the effects of the government's real estate policies.
Kim Jae-hee, Arirang News."