South Korea’s central bank on Friday cut its growth forecast for this year to 2%, which would be the weakest rate in a decade as the economy is battered by trade disputes.
The world’s 11th-largest economy is highly dependent on international commerce but is grappling with the fallout of a prolonged China-US trade dispute and embroiled in a spat of its own with neighboring Japan.
The Bank of Korea cut its 2019 growth forecast from 2.2% to 2%, governor Lee Ju-yeol told reporters, also trimming its prediction for next year to 2.3% from 2.5%.
The 2% figure would be the slowest expansion since 2009, when the country posted 0.8% growth in the wake of the global economic crisis.
In a statement, the BOK said exports were facing continuing “sluggishness,” while domestic consumption growth had also weakened.
The numbers bring the BOK’s forecasts into line with the International Monetary Fund.
The US-China trade war has heightened global economic uncertainty while South Korea and Japan have been at loggerheads over wartime history, with Tokyo in July tightening export controls on three chemicals essential to South Korean tech companies such as Samsung.
An easing of the dispute between Beijing and Washington would see global investment rise and “contribute to an increase in our exports,” governor Lee said, but added that would not be enough on its own to ensure strong economic momentum.
The central bank kept its key interest rate at a record low 1.25% in an effort to prop up growth, having announced two cuts already this year.
South Korean President Moon Jae-in came to office in May 2017 with an economically unorthodox policy of “income-led growth,” promising to jump-start expansion through a series of labor-friendly policies such as wage increases.
But expansion has since been slipping.