BOK expected to cut 2025 growth outlook to 1.6 pc this week

Seoul: The South Korean central bank is widely expected to significantly lower its growth forecast for Asia’s fourth-largest economy to 1.6 percent due to slower-than-anticipated recovery in domestic demand and sluggish export growth, experts said on Sunday.

According to a survey conducted by Yonhap News Agency, seven local analysts and economists predicted that the Bank of Korea (BOK) would reduce its current growth projection of 1.9 percent when it announces an updated forecast on Tuesday.

“Sluggish private consumption, declining automobile exports due to U.S. tariffs and uncertainty in semiconductor exports will be factored into the revision,” said Park Jung-woo, an economist at Nomura Securities Co.

Ahn Jae-gyun, an analyst at Shinhan Securities Co., also said a prolonged slump in construction investment and weak domestic demand would be major contributing factors.

BOK Gov. Rhee Chang-yong has previously hinted at a possible downward revision to around 1.6 percent.

The revision, if confirmed, would align with the Korea Development Institute’s recent projection, which has lowered its 2025 growth estimate to 1.6 percent, delivering a 0.4 percentage-point reduction from its previous outlook in November.

In January, the BOK kept its benchmark interest rate frozen in the wake of the weak local currency amid political chaos and uncertainties stemming from U.S. President Donald Trump’s new administration.

The on-hold decision came on the heels of two rate cuts in the October and November meetings.

“The country is facing growing downside risks centering on weak domestic demand, while the won’s further weakness seems limited, which would lead the BOK to lower the policy rate by 25 basis points,” said Kim Seon-tae, an expert from KB Kookmin Bank.

Nineteen out of the 21 analysts polled anticipated the key rate to be lowered to 2.5 per cent in the first half of this year.

South 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.

—IANS