SEOUL, February 21 (AJP) - A London-based research firm has issued a dire warning about South Korea’s economic outlook, forecasting that the country’s growth rate could fall to just 1 percent this year — a sharp decline that underscores mounting political and financial pressures.
In a report, Capital Economics revised its projection for South Korea’s real gross domestic product growth, lowering it from 1.1 percent to 1 percent. The firm cited a deepening political crisis and prolonged stagnation in the real estate sector as key factors dragging down growth.
The report noted this is a figure well below market expectations. The firm also predicted that the Bank of Korea (BOK) would slash its benchmark interest rate by a full percentage point this year in response to the slowdown — a move far more aggressive than most analysts anticipate.
Such a reduction would bring rates down from the current 3 percent to 2 percent, potentially through a series of four 0.25 percentage-point cuts.
The revised outlook places Capital Economics at the low end of global forecasts. The average projection among major international investment banks stands at 1.6 percent, with JP Morgan previously issuing the most pessimistic forecast at 1.2 percent.
South Korean institutions have also been lowering their expectations. Earlier this month, the Korea Development Institute cut its 2024 growth forecast from 2 percent to 1.6 percent. The BOK is set to release its own revised economic outlook on Feb. 25.
BOK Governor Rhee Chang-yong, addressing lawmakers last week, acknowledged the growing uncertainty. “Beyond political instability, multiple factors — including U.S. economic policies and the Federal Reserve’s interest rate decisions — are influencing the outlook,” he said.
When asked about the central bank's previous assumption of 1.6 to 1.7 percent growth, Rhee offered a cautious response. “We are reviewing the situation again,” he said.
Copyright ⓒ Aju Press All rights reserved.
