SEOUL (AFP) – South Korea’s central bank chief said that annual growth is expected to fall short of a recent forecast due to sweeping United States (US) tariffs.
US President Donald Trump’s threatened 25 per cent ‘reciprocal’ tariffs on the export-dependent South Korea have rattled Asia’s fourth-largest economy, sending Seoul-listed shares tumbling and pushing the currency to its weakest level since 2009.
“This year’s annual growth rate is now expected to fall short of the 1.5-per-cent forecast made in February,” said Bank of Korea (BOK) Governor Rhee Chang-yong. “The tightening of tariff policies, which is much stronger than initially projected, will likely further weigh on growth prospects,” Rhee told reporters in a press conference.
He added that “political uncertainty has dragged on longer than expected, delaying the recovery of economic sentiment”.
Sluggish domestic demand, along with unprecedented factors such as large-scale wildfires which tore through swaths of the country’s southeast late March, had also contributed to the downturn, Rhee said.
The BOK held its interest rate steady at 2.75 per cent, its third straight decision to keep rates unchanged after a 0.25 percentage point cut in February.
Given the “significant uncertainty” due to US tariffs and the government’s push for economic stimulus, “the board judged it appropriate to keep the base rate unchanged for now while closely assessing changes in domestic and external conditions”.
Rhee said the decision was driven by tariff-related “uncertainty” going forward, which has grown to an “unprecedented level”.
