SEOUL, South Korea – 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 on Thursday, May 28, as it cut interest rates to a record low.
The world’s 12th largest economy will shrink 0.2%, the Bank of Korea (BOK) predicted, a dramatic downgrade from the 2.1% growth it had forecast in February.
“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 3 months, after a surprise 50-basis-point reduction to 0.75% in March.
The South is highly trade-dependent and saw its worst economic performance in more than a decade in the 1st quarter as the epidemic struck.
Gross domestic product shrank 1.4% year-on-year during the January to March period, its biggest decline since the 4th quarter of 2008 during the global financial crisis.
The International Monetary Fund (IMF) has forecast the world economy will contract 3% this year, saying it is expected to “experience its worst recession since the Great Depression” over the pandemic.
The IMF has predicted the South Korean economy will shrink 1.2% in 2020. – Rappler.com