Seoul: South Korea’s economic growth is projected to be slower than previously anticipated this year, largely due to a downturn in outbound shipments, the central bank chief announced on Tuesday. Earlier projections by the Bank of Korea (BOK) estimated that Asia’s fourth-largest economy would grow by 2.4 percent this year. However, BOK Governor Rhee Chang-yong informed lawmakers that the expansion might fall short, landing between 2.2 percent and 2.3 percent.
According to Yonhap News Agency, Rhee stated, “It is highly likely to see this year’s growth rate be lower than our earlier expected rate of 2.4 percent. I think the rate will be at between 2.2 and 2.3 percent.” The country’s economy grew by a modest 0.1 percent on-quarter in the third quarter, underperforming market expectations of a 0.5 percent increase. This slowdown has raised the likelihood of the central bank implementing another rate cut sooner than anticipated, following its first reduction in over three years earlier this month.
The third-quar
ter growth figure is notably lower when compared to the 0.2 percent on-quarter contraction in the April-June period and the 1.3 percent rise recorded in the first quarter of the year. On an annual basis, South Korea’s economy expanded by 1.5 percent in the third quarter, decelerating from a 2.3 percent growth rate in the second quarter.
Rhee highlighted that, despite exports remaining solid in terms of value, one-off factors such as strikes in the auto sector and heightened competition have led to a decline in overseas shipments. He also noted that the central bank’s upcoming rate decision will weigh multiple considerations, including the outcome of the U.S. presidential election, the Federal Reserve’s rate decision, and the country’s household debt levels.
Rhee emphasized that it is not immediately necessary to implement economy-boosting measures and assured that the central bank is closely monitoring currency rates. “We don’t need economy-boosting steps via fiscal policy,” he remarked. Last week, Rhee poi
nted out that the weakening of the Korean won is becoming a significant factor in rate decisions amid the slowing economy.
Furthermore, he reassured that South Korea possesses sufficient foreign reserves to manage any volatility in the currency market if required, underlining the availability of ample foreign exchange stabilization funds.