November 13, 2019 / 3:00 AM / a month ago

S.Korean government think-tank calls for further rate cuts

SEOUL, Nov 13 (Reuters) - South Korea’s top government think-tank on Wednesday called on the central bank to cut interest rates further and slashed its economic growth and inflation forecasts for this and next year.

The Korea Development Institute (KDI), which frequently undertakes research for major national economic projects, cut this year’s economic growth forecast to 2.0% from 2.4% previously and next year’s to 2.3% from 2.5%.

Its new forecasts are also lower than the central bank’s latest projections, made in July, for growth of 2.2% for this year and 2.5% for next year and suggest the Bank of Korea’s next revisions due later this month could be downward.

“Monetary policy needs to be managed with an easier stance to deal with low inflation and downward pressure on economic growth,” KDI said in the report.

The KDI also trimmed this year’s annual consumer inflation forecast to 0.4% from 0.7% previously and more than halved next year’s projection to 0.6% from 1.3%.

The Bank of Korea, which sets monetary policy, cut the rate by a combined half percentage point in two steps between July and October to 1.25%.

It next reviews the rate on Nov. 29.

South Korea’s economy, Asia’s fourth-largest, has been hit especially hard by the fallout from the prolonged U.S.-China tariff war and the plunge in semiconductor prices from last year’s super rally.

The KDI’s new projection means this year’s growth would be the slowest since the 2008-2009 global financial crisis and - when excluding crisis years - the worst since the country’s industrialisation started more than five decades ago. (Reporting by Choonsik Yoo; Editing by Sam Holmes)

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