Bank of Korea Lowers Economic Growth Forecast to 2.5%

The Bank of Korea lowered its forecast for this year's domestic economic growth to 2.5%. The central bank lowered expectations by 0.1% from the previous forecast. However, the bank expected the economy to start off slow in the first half of the year and accelerate in the second half, so it froze the base interest rate at an annual 1.75%. The base rate has been frozen for five consecutive months since it was last raised in November 2018.

Lee Ju-yeol, the governor of the Bank of Korea announced these details when announcing a revised economic forecast for 2019 at the central bank office in Taepyeong-ro, Seoul on April 18. Lee said, "This year's gross domestic product (GDP) is expected to grow by 2.5%, slightly less than the forecast in January (2.6%)," and added, "We reviewed the export and investment trends of the first quarter and noticed that they were lower than the original expectation, so we reflected this in the latest forecast."

He also said, "However, fiscal spending is increasing and we are seeing improvements in export and investment, so we expect the economy to gradually recover." The Bank of Korea expected the economy to grow by 2.3% in the first half of this year and 2.7% in the second half. The latest forecast did not reflect the supplementary budget, which the government will submit to the National Assembly on April 25.

The central bank also lowered its inflation forecast from the previous 1.4% to 1.1%. Lee explained, "The falling consumer prices are mainly due to temporary supply factors, such as the weak oil prices and agricultural products and seafood prices, and a stronger welfare policy by the government." He also said, "There is very little possibility of a deflation in the future."

The Bank of Korea Monetary Policy Board unanimously decided to maintain the benchmark interest rate at 1.75%. The governor said that the bank was "not considering" lowering the interest rate. He also said that the bank was "not at all thinking of" redenomination.

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