Bank of Korea Governor Says Recovery Hinges on Containing Latest Wave

(Bloomberg) -- South Korea’s pace of economic recovery hinges on its success in controlling the latest coronavirus wave, Bank of Korea Governor Lee Ju-yeol said.

“If the spread of infections isn’t curbed, the hit to consumption would definitely serve as a factor lowering the growth estimate for next year,” Lee said Thursday in a media briefing. The BOK last month forecast the economy to grow 3% next year after contracting 1.1% in 2020.

After an early success in controlling outbreaks without shuttering businesses, South Korea has recently seen daily infection cases soar to beyond 1,000. The record number of cases has prompted the government to consider imposing the harshest social distancing restrictions including closing high-risk facilities and businesses.

Lee said the latest virus wave is poised to hit consumption more than the two previous ones if not controlled, and added mom-and-pop stores would be hurt the most along with temporary workers. Still, improving exports around semiconductors are expected to shore up the economy hit by the virus, Lee said, as vaccinations widen in other countries.

The governor’s comments were made as part of the central bank’s annual review of its inflation target.

Lee said the central bank and the government have agreed to maintain the 2% target although inflation has trailed that level for some time. With a gradual containment of the pandemic as vaccines and remedies are developed, consumer price gains will recover toward the goal, albeit at a slow pace, Lee said.

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