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Economic recovery to remain weak amid flare-up in virus cases: BOK chief

All News 10:00 August 24, 2020

SEOUL, Aug. 24 (Yonhap) -- South Korea's top central banker said Monday the momentum for economic recovery is expected to remain weak amid a recent spike in coronavirus cases.

Bank of Korea (BOK) Gov. Lee Ju-yeol said in a report to the National Assembly that the BOK will manage its monetary policy in an accommodative manner to prop up the local economy.

"After suffering sharp deterioration, the Korean economy showed some signs of an improvement on eased slumps in exports and consumption," Lee said.

"But as virus cases have recently resurged, the economic recovery is expected to remain weak, and economic uncertainty has further heightened," he added.

This file photo, taken June 4, 2020, shows stacks of import-export cargo containers at South Korea's largest seaport in Busan, 450 kilometers southeast of Seoul. (Yonhap)

The South Korean economy contracted 3.3 percent in the second quarter from three months earlier, the worst performance in over two decades, as exports tumbled amid the COVID-19 pandemic.

To bolster the slumping economy, the BOK slashed its key policy rate in May to a record low of 0.5 percent after delivering an emergency rate cut of half a percentage point in March.

Policymakers earlier forecast a rebound in the third quarter on the back of the country's massive budget spending and an improvement in global production.

But the possibility of nationwide virus outbreaks and another wave of the COVID-19 pandemic are likely to put downward pressure on the economic recovery.

South Korea reported more than 300 virus cases for the third straight day Sunday largely due to church-tied infections. Over the past 10 days, a total of 2,629 cases have been identified.

Experts forecast the BOK will stand pat at the key rate Thursday despite spiking virus cases, as it is expected to seek to gauge the impact of its rate cuts amid tamed inflationary pressure.

Lee said the country's consumer prices will likely move in the zero-percent range for the time being.

The governor also said the BOK will keep close tabs on the development of the virus outbreak and its impact on the local economy and financial markets.

"We will also closely monitor changes in financial stability, stemming from growing household debt amid rising home prices and excessive cash inflows to the housing market," Lee added.

sooyeon@yna.co.kr
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