Bank of Korea Anticipated to Revise 2025 Growth Forecast to 1.6%
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Synopsis
The Bank of Korea is set to revise its growth forecast for South Korea's economy to 1.6% due to a sluggish recovery in domestic demand and exports. Analysts predict significant downward adjustments stemming from various economic challenges.
Key Takeaways
- Bank of Korea expected to lower growth forecast.
- Revised growth estimate could be 1.6%.
- Domestic demand recovery slower than anticipated.
- Export growth remains sluggish.
- Potential policy rate cut anticipated.
Seoul, Feb 23 (NationPress) The Bank of Korea is expected to lower its growth forecast for South Korea, the fourth-largest economy in Asia, to 1.6 percent due to a slower-than-expected rebound in domestic consumption and a decline in export growth, according to experts on Sunday.
A survey by Yonhap News Agency indicated that seven local analysts believe the BOK will revise its current growth estimate from 1.9 percent when it releases its updated forecast on Tuesday.
Park Jung-woo, an economist at Nomura Securities Co., noted, "Factors such as lackluster private consumption, reduced automobile exports resulting from U.S. tariffs, and uncertainty surrounding semiconductor exports will influence this revision."
Ahn Jae-gyun, an analyst at Shinhan Securities Co., added that a prolonged downturn in construction investment and weak domestic demand would also be significant factors.
BOK Governor Rhee Chang-yong had previously suggested that a downward revision to approximately 1.6 percent was possible.
If confirmed, this revision would be consistent with the recent projection from the Korea Development Institute, which has also lowered its 2025 growth estimate to 1.6 percent, reflecting a 0.4 percentage-point reduction from its forecast in November.
In January, the BOK maintained its benchmark interest rate amid the weak local currency and ongoing political uncertainties linked to the new U.S. administration.
This decision followed two prior rate cuts in October and November.
According to Kim Seon-tae from KB Kookmin Bank, "The country is experiencing increasing downside risks due to weak domestic demand, and the won's further depreciation appears to be limited, which may prompt the BOK to reduce the policy rate by 25 basis points."
Nineteen out of 21 analysts surveyed expect the key rate to drop to 2.5 percent during the first half of this year.
South Korea's potential growth rate stands at 2 percent, and this year could be the first time the annual growth rate falls below this level.
