BOK cuts growth projection to 1.6%

[Anchor]

This year's growth rate forecast has been revised down again.

According to the Bank of Korea's mid-term assessment, it is projected to grow by 1.6 to 1.7%.

This assessment is based on the assumption that the political situation will stabilize soon.

This is a report by Song Soo-jin.

[Report]

The Bank of Korea, which froze the base rate due to concerns over the exchange rate.

Looking at domestic demand alone, they indicated that rates should be lowered immediately, announcing an unexpected mid-term growth rate assessment.

[Lee Chang-yong/Bank of Korea Governor/Jan. 16: "We are considering to share a mid-term assessment because there have been significant changes."]

As a result, they projected a growth rate of 1.6 to 1.7% for this year.

In February last year, the growth rate for 2025 was estimated at 2.3%, but it was revised down to 2.1% in May and August, and to 1.9% in November, now down to 1.6 to 1.7%.

This means a drop of up to 0.7 percentage points in just 11 months.

In the first year of the COVID-19 pandemic in 2020,

the government released an additional 66 trillion won through four supplementary budgets, which KDI evaluated as having defended the growth rate by about 0.5 percentage points.

[Cho Young-moo/Researcher at LG Business Research: "Considering the effects of the martial law and impeachment phases, and the fact that the (trade) war assumptions made during the initial forecast are not progressing optimistically, I believe this downward adjustment in the growth rate was inevitable."]

The Bank of Korea assumed in this mid-term assessment that political uncertainties would ease starting in the second quarter.

If this assumption also fails, it could mean that slow growth could worsen further.

Given the significant downward revision of the growth rate forecast, it is interpreted that the possibility of the Bank of Korea lowering the base rate has increased.

However, for the effects of such a rate cut to fully materialize, the interest rate spread of commercial banks need to stabilize.

This is KBS News, Song Soo-jin.