South Korean central bank cuts rates to record low, sees contraction

The Bank of Korea (BoK) today estimated that gross domestic product (GDP) will contract 0.2% this year due to the coronavirus pandemic and decided to cut rates by a quarter point to leave them at the record low of 0 ,5 %.

The opinion represents a deep cut compared to its forecast issued in February - when the virus had not yet spread globally -, in which it calculated that Asia's fourth economy would grow by 2020 by 2.1%.

"We believe there are many uncertainties regarding the evolution of GDP," the BoK board added in a statement after meeting today.

The entity's governor, Lee Ju-yeol, said at a press conference today that the current estimate is based on the belief that "the pandemic will peak globally in the second quarter and that there will be no second big wave. of contagions in the country, "according to the Yonhap news agency.

The spread of COVID-19 across the planet is beginning to greatly affect the main pillar of the South Korean economy, exports.

Shipments abroad to South Korea, one of the countries that has best controlled the spread of the virus, fell by almost 25% year-on-year in April, the month in which it reaped its first trade deficit in 8 years.

In a unanimous decision by the governing board, the BoK cut the benchmark by a quarter of a point to leave it at the historic low of 0.5% in order to alleviate the current situation.

This measure and the drastic cut in the growth forecast were already taken for weeks, while most experts are sure that the South Korean economy will experience its worst year since 1998, when GDP contracted by 5.1 % due to the effects of the financial crisis of the Asian tigers.


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