Seoul predicts economy will shrink, cuts interest rate
Seoul: South Korea’s economy is expected to suffer its first annual contraction since the 1990s as a result of the coronavirus, the central bank forecast Thursday as it cut interest rates to a record low.
The world’s 12th-largest economy will shrink 0.2 percent, the Bank of Korea (BOK) predicted, a dramatic downgrade from the 2.1-percent growth it had forecast in February.
The BOK cut its key interest rate by 25 basis points to 0.5 percent, joining other central banks moving to try to stem the impact of the pandemic, which analysts say threatens to cause a global recession.
“The growth of the domestic economy has slowed significantly” due to the coronavirus, and is expected to be sluggish and unpredictable in future, the central bank said in a statement.
“The employment situation has deteriorated,” it added, with many in the service sector losing jobs, while “exports fell significantly”.
It is the second rate cut in three months, after a surprise 50-basis-point reduction to 0.75 percent in March. – AFP