No clear economic recovery in sight: Bank of Korea

27-Nov-2020 Intellasia | KoreaTimes | 6:02 AM Print This Post

The domestic economy has not yet entered a stable and clear recovery track amid renewed fears of a third wave of the COVID-19 pandemic here, Bank of Korea governor Lee Ju-yeol said Thursday.

“We cannot say for sure that an economic recovery is underway when we consider that COVID-19 infections could continue to expand for the foreseeable future,” Lee said during an online press conference after a monetary policy board meeting.

The pessimistic outlook comes as the country is reporting a growing number of coronavirus cases ? the Korea Disease Control and Prevention Agency reported more than 500 new infections Wednesday, the highest number since March 6.

With virus fears resurfacing rapidly nationwide, Lee projected that the third wave of infections poses a more serious threat of economic damage than the second one that gripped the nation in August.

“The spread of the new cases here will likely continue throughout the winter, and this will have an impact on consumption,” Lee said. “If the authorities elevate the level of social distancing measures, this will definitely bring about a negative impact on the economy.”

The BOK also altered its outlook for the nation’s 2020 GDP figure to a contraction of 1.1 percent amid some signs of an export recovery despite the virus-related uncertainties. This is a readjustment of 0.2 percentage points from its earlier forecast unveiled in August.

The central bank also kept its key interest rate frozen at 0.5 percent during the board meeting, making it clear that now is not the time for the BOK to push it up.

The BOK’s view is that the COVID-19 pandemic will start showing signs of subsiding as early as mid-2021, but the forecast is subject to change in line with how serious the spread will be over the next few months, according to Lee.

“This is why we cannot make any rash changes to the ongoing monetary easing stance,” he said.

The central bank was widely expected to keep the benchmark rate unchanged during its final monetary board meeting of the year.

Experts also argued that it would be tough for the BOK to raise the rate even throughout 2021, as the global pandemic shock is likely to keep weighing on the local economy.

“The BOK will not be under pressure to hike the interest rate for the time being as no clear sign of an economic recovery has been detected,” Yonsei University economist Sung Tae-yoon said.

“Regardless of the outcome of the recent US election, the Federal Reserve has decided to keep its near-zero rate for more years to come, which also signals a low possibility of putting upward pressure on the BOK’s key rate.”

Lee did not comment on recent statements in the political circle that the central bank should expand its role into non-monetary areas ? such as employment stabilisation.

“We need to hold thorough discussions on the issue, and the central bank will actively take part in any negotiations over revising laws related to the matter,” he said.

https://www.koreatimes.co.kr/www/biz/2020/11/367_299970.html

 

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