BOK chief highlights sluggish demand, martial law attempt as downside risks to growth

South Korea’s central bank chief said Wednesday that the economy is likely to grow at a slower-than-expected rate for the year due to a protracted slump in private spending and impeached President Yoon Suk Yeol’s short-lived impeachment declaration.

“For the year, economic growth is highly likely to be 2.1 percent,” Bank of Korea (BOK) Gov. Rhee Chang-yong said in a press conference on price stabilization.

“For the fourth quarter, we expected a 0.5 percent expansion, but the number is likely to be 0.4 percent or lower.”

Last month, the BOK trimmed the growth forecast for this year to 2.2 percent from 2.4 percent.

Rhee also said next year’s growth rate may be slower than expected. Earlier, the central bank projected a 1.9 percent advance for next year.

“A fiscal policy to boost the economy by a small margin is necessary. … It is not desirable for the fiscal policy to have an impact on the economy in a restrictive manner,” he said.

As the downside risks to the economy are great, it is desirable to formulate an extra budget as soon as possible, he added.

As to a rate cut going forward, the BOK chief said a big rate cut at the January meeting would not be necessary, but the central bank will closely assess economic data.

Rhee also said the central bank intervened in the aftermath of Yoon’s martial law attempt on Dec. 3.

“Intervention will again come if volatility is seen as excessive,” he said.