It is expected that the Bank of Korea will adjust its domestic economic growth rate forecast downward to slightly over 3 percent before the announcement scheduled for April 9.
The adjustment has to do with the central bank having cut the key rates this month, earlier than expected, in view of the domestic recession, external uncertainties, and Deputy Prime Minister Choi Kyung-hwan having released an additional economic stimulus plan worth 10 trillion won (US$9 billion) on March 20.
In October of last year, the central bank estimated this year’s economic growth rate to be 3.9 percent. However, the shock in the last quarter caused it to lower the figure by no less than 0.5 percentage points. In Q4 2014, quarter-on-quarter economic growth stood at 0.3 percent, much lower than the previous expectation of 1.0 percent, and even 0.2 percentage points lower than immediately after the Sewol Ferry disaster in Q2.
To compound the matter, economic indices failed to recover in the first two months of this year. According to Statistics Korea, the total industrial output dropped 1.7 percent month-on-month in January, and the decrease in mining industry output amounted to 3.7 percent, a 73 month record. Furthermore, retail sales and capital expenditures decreased 3.1 percent and 7.1 percent, respectively.
Economic institutes are becoming increasingly pessimistic about Korea’s economic outlook as well. The Korea Economic Research Institute, associated with the Federation of Korean Industries, recently lowered its estimate from 3.7 percent to 3.4 percent, while the Asia Development Bank adjusted its forecast from 3.8 percent to 3.5 percent. Nomura Securities’ estimate is as low as 2.5 percent, and S&P’s ranges from 2.3 to 4.0 percent.