BOK EXPECTS ANOTHER DECLINE IN GROWTH FORECAST

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The Bank of Korea sharply lowered the country's growth forecast for this year to minus 0.2% two months ago. The central bank has now warned of a steeper growth decline, as the global spread of COVID-19, unlike expectations, does not appear to be mitigating even in the year's second half.

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Domestic demand and consumption rebounded in the second quarter but the drop in exports was much larger than anticipated. This is why the Bank of Korea forecast the economy can contract further and growth can be even lower than minus 0.2% for 2020. Overall outbound shipments in May and June appear to have improved from previous months. But a closer look shows this is due to fewer holidays and more business days. The daily average amount of exports, an indicator of future trends, remains in the minus 18 percent range. The lackluster figures are linked to the worldwide coronavirus situation which is not likely to improve any time soon. Earlier, BOK anticipated the pandemic would peak in the second quarter and begin to slow from the third quarter. It's mid-July now, and the virus has spread even further. Conditions have changed from the time the bank forecast a minus 0.2% growth. The number of COVID-19 cases has surged in Brazil and India, leading to economic recession. In the US where fears of a second wave have increased, some states are reinstating lockdown measures. All this is bad news for the export dependent Korean economy.

[Soundbite] LEE JU-YEOL(BOK GOVERNOR) : "It's not an overstatement to say the future of the global economy nearly entirely depends in the battle against COVID-19. Based on current conditions alone, the worst case scenario may be avoided."

However the central bank's rate setting committee decided to keep the policy rate at 0.5 percent. This is because the rate is already close to zero and other domestic factors such as real estate must also be considered. But the BOK emphasized, it will continue the stance of easing monetary policies and utilize policy tools other than the interest rate such as loans and bond purchase, if it's necessary.