S.Korea's central bank cuts 2020 economic growth outlook to 2.1 pct over COVID-19 outbreak

Source: Xinhua| 2020-02-27 14:04:41|Editor: yhy
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SEOUL, Feb. 27 (Xinhua) -- South Korea's central bank cut the country's 2020 economic growth outlook to 2.1 percent Thursday on worry about the COVID-19 outbreak.

Bank of Korea (BOK) said in a statement after the rate-setting meeting that the real gross domestic product (GDP), adjusted for inflation, was forecast to grow 2.1 percent this year. It was down from a 2.3-percent expansion estimated three months earlier.

Outlook for consumer price inflation was unchanged at 1.0 percent. It was far below the BOK's mid-term inflation target of 2.0 percent.

The downward revision came amid the growing concern over the surge in recent days of the COVID-19 infection in South Korea.

As of Thursday morning, the number of infected patients totaled 1,595, up 334 from the previous day.

The virus infection soared for the past week, with 1,230 new cases reported from Feb. 19-26. The country raised its four-tier virus alert to the highest "red" level on Sunday.

BOK Governor Lee Ju-yeol and six other monetary policy board members decided to leave the benchmark seven-day repurchase rate unchanged at a record low of 1.25 percent.

The decision was not unanimous. Two members claimed a 25-basis-point rate cut, raising a possibility for the BOK to slash the target rate to a fresh low of 1.00 percent as early as in April.

Lee told a press conference after the rate-setting meeting that the COVID-19 outbreak already worsened consumer spending and the services industry, including tourism, eatery and lodging, and wholesale and retail sectors.

The governor noted that a significant part of the negative effect would be focused on the first quarter, estimating that there was a possibility for the South Korean economy to have a negative growth in the first quarter.

The BOK forecast that the negative effect from the virus outbreak would be short-term and limited after peaking in March.

The central bank said in the statement that the growth trend of the economy was expected to gradually be enhanced with private consumption and export coming out of slump, amid the expansionary fiscal policy and the recovering facility investment.

South Korean President Moon Jae-in ordered government officials Monday to draw up a supplementary budget to support the virus-hit regions and industries. The Moon government's 2020 budget was a record 512.5 trillion won (422.8 billion U.S. dollars).

Outlook for this year's private consumption growth was cut to 1.9 percent from 2.1 percent estimated three months earlier. The first-half forecast was slashed from 1.9 percent to 1.1 percent, but the second-half outlook was increased from 2.2 percent to 2.6 percent.

The BOK said private consumption was projected to weaken in the short-term amid the virus spread, before turning around rapidly with the virus calming down.

Facility investment was forecast to gain 4.7 percent this year, down from the previous growth outlook of 4.9 percent.

Outlook for goods export growth was lowered to 1.9 percent from the previous 2.2 percent, but forecast for current account surplus was raised from 56 billion U.S. dollars to 57 billion U.S. dollars.

Investment in the construction sector was predicted to reduce 2.2 percent amid the government's efforts to control speculative investment in the real estate market.

Meanwhile, the BOK maintained its 2021 growth forecast at 2.4 percent and next year's headline inflation outlook at 1.3 percent each.