BOK Governor Less Confident on Growth Ahead of Rate Meeting

(Bloomberg) -- Bank of Korea Governor Lee Ju-yeol is sounding less optimistic about South Korea’s economy as the central bank prepares for a rate-setting decision next week.

Despite signs earlier in the day that the slowdown in world tech demand may be easing, Lee said in parliament that he wasn’t getting more confident that the economy would achieve the central bank’s 2.5% growth forecast for 2020. He already said last month that the global deceleration and a cooling of tech demand had made it hard for growth to reach the BOK’s 2019 growth of 2.2%.

Most economists expect the bank to cut rates either this month or next after standing pat at the end of August. Lee’s comments Tuesday suggest that, whatever the BOK does at its next meetings, the bank will need to stick with an accommodative stance for a prolonged period of time. At 1.5%, South Korea’s key rates are already just 25 basis points from a record low.

Although Lee showed less confidence in the BOK’s forecasts, he said he didn’t expect growth to slow below the 2% rate this year, which is what private sector economists are predicting.

Highlighting the impact on the South Korean economy of the U.S.-China trade war and tech sector weakness, the latest current account report, released Tuesday, showed the country’s surplus in goods’ shipments shrank in August to its smallest since early 2014. South Korea’s exports have fallen 10 months in a row.

Preliminary earnings from Samsung Electronics Co. signaled a potential softening of the tech slowdown. South Korea’s biggest company reported third-quarter operating profit that beat the highest analyst estimates and boosted views that the global chip cycle may be near or at the bottom.

BOK Governor Lee made no mention of Samsung’s earnings in his remarks.

“The bottom line is that rising protectionism has led to a drastic cut in South Korea’s exports,” said Kim Doo-un, an economist at KB Securities. “It’s also too early to say with conviction the chip cycle is bottoming out although beating market consensus is an upbeat sign. Even if it recovers, the question is for how long.”

To contact the reporter on this story: Sam Kim in Seoul at skim609@bloomberg.net

To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Jason Clenfield, Paul Jackson

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