SEOUL (Reuters) - South Korea’s central bank is expected to lower its policy rate to a record-low on Thursday, the third cut in the current easing cycle, a Reuters poll showed, to offset the impact on Asia’s fourth-largest economy from the fast-spreading coronavirus.
FILE PHOTO: The buliding of Bank of Korea is seen in Seoul, South Korea, July 14, 2016. REUTERS/Kim Hong-Ji
The trade-reliant economy, which was among those worst-hit by trade tensions, is faced with an extra hurdle as the virus outbreak disrupted world supply chains and global demand.
Another four analysts expect the central bank to cut rates at least by May.
In January, only six of 29 analysts saw a cut in February after the central bank struck a more upbeat tone at its last policy meeting due to improving trade conditions and a resilient domestic environment.
Earlier this month, BOK Governor Lee Ju-yeol said the central bank would be cautious about further policy easing, as economic indicators needed to be assessed carefully to gauge the impact from the virus.
“Exports per working day during the first 20 days of February fell 9.3%, which shows the negative spillover from the virus spread on South Korean exports have started materializing,” said Lee Mi-seon, fixed-income analyst at Hana Financial Investment.
“As the number of confirmed cases sharply increased over the past week, economic conditions in South Korea have turned into a grave situation,” she added.
South Korean President Moon Jae-in said on Monday the government should start reviewing whether a supplementary budget should be drawn up to head off the impact of the virus outbreak on the economy.
Economists are concerned the virus outbreak will hit economic growth in both the first and second quarters.
The virus impact was also seen cooling demand at home as the consumer sentiment index in February fell to 96.9 from 104.2 a month earlier. This was the lowest reading in six months and the biggest monthly fall since June 2015, Bank of Korea data showed on Tuesday.
The central bank said on Monday it will email and text message registered reporters when it announces its rate decision on Thursday and broadcast the press conference live to limit crowds and contain the spread of the coronavirus.
