Summary
- Global investment bank JP Morgan announced that it has lowered South Korea's economic growth rate for this year from 0.9% to 0.7%.
- JP Morgan forecasted that due to US tariff increases and the resulting economic recession, South Korea's exports will decrease and the growth rate will decline.
- It was reported that in response to South Korea's economic slowdown, the Bank of Korea is likely to lower the base rate.
Forecast lowered from 0.9% to 0.7%
"Bank of Korea to Lower Base Rate on the 17th"
Global investment bank (IB) JP Morgan has adjusted its forecast for South Korea's economic growth rate this year from 0.9% to 0.7%. This was announced through an economic outlook report released on the 8th. Reflecting the outlook that the global economy, including the United States, will shrink due to the intensifying tariff war, the forecast was lowered again within a week. Next year's growth rate forecast was also lowered from 2.0% to 1.8%.
JP Morgan, which forecasted Korea's growth rate at 1.7% for this year last November, has since lowered it four times. The growth rate forecast of 0.7% presented by JP Morgan today is the lowest among global institutions and IBs. JP Morgan economist Park Seok-gil, who wrote the report, stated, "The growth rate was adjusted downward considering that the US economy will slump due to the increase in US tariff rates."
JP Morgan predicted that the imposition of US tariffs would increase the prices of Korean export products, thereby curbing the growth of exports. It also analyzed that the real export growth rate in the third and fourth quarters of this year will record a negative. It is expected that the narrowing of export routes will also lead to a decrease in manufacturing production. The GDP of the manufacturing sector is expected to fall below the previously anticipated level.
JP Morgan expects the Bank of Korea to steadily lower the base rate in response to the economic downturn. It is forecasted that the base rate, currently at 2.75% per annum, will be lowered to 2.5% at the Monetary Policy Committee meeting on the 17th. By the second quarter of next year, the base rate is expected to fall to 1.5% per annum.
Recently, global IBs and institutions have been consecutively lowering Korea's growth rate for this year to the 0% range. On the 26th of last month, UK economic analysis firm Capital Economics also lowered Korea's growth rate forecast from the previous 1.0% to 0.9%.
Reporter Ik-hwan Kim lovepen@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
