South Korea's central bank lowered its growth estimate for the year by 0.2 percentage point to 2.1 percent on Thursday as the fast-spreading coronavirus may have a far-reaching impact on Asia's fourth-largest economy.
The downward revision came as the COVID-19 outbreak is feared to badly hurt the economy, which was earlier expected to grow 2.3 percent this year.
The BOK singled out the virus outbreak as a main reason for the downward revision of its growth outlook but said the economy will recover quickly once the outbreak is contained.
"After a temporary slowdown due to the negative impacts from COVID-19, the domestic economy is expected to recover as private consumption and exports rebound amid continued fiscal expansion and a recovery in facilities investment," it said in a press release.
"Private consumption is expected to contract on a short-term basis due to the spread of COVID-19. However, it is forecast to recover at a rapid pace after the COVID-19 situation subsides," it added.
As of Thursday, 1,595 South Koreans have been infected with COVID-19, while 13 have died from the virus.
BOK Gov. Lee Ju-yeol said the fallout from the virus may still be short-lived.
"Under current conditions, we cannot but base our economic outlook on how wide and how long the outbreak will last. And it is based on a view that it will not last long. That is, the outlook is based on an assumption that (the spread of the virus) will peak in March and then dwindle," he said in a press briefing held after the monetary policy board meeting, in which the bank's seven-member board voted 5-2 to keep the policy rate frozen at 1.25 percent.
Still, the top central banker noted the fallout from the new coronavirus may be greater than those from previous epidemics, adding the local economy may even shrink from three months earlier in the first quarter.
"We believe most of the negative effects will emerge in the first quarter," Lee said.
It also kept its 2021 growth estimate intact at 2.4 percent.
Last year, the economy grew 2 percent, marking the slowest rise in a decade, largely due to the lengthy trade row between the United States and China -- the country's top two trading partners -- and an extended slump in chip prices.
The county's exports sank by more than 10 percent last year.
"The growth of goods exports is forecast to improve modestly (in 2020)," the BOK said.
It said the country will continue to post a current account surplus over the next two years but that its surplus will likely narrow to $57 billion in 2020 and $54 billion next year from $60 billion in 2019.
The latest growth estimate from the BOK follows a series of downward revisions by other economic institutes.
Global ratings agency Moody's has lowered its own growth outlook for the country to 1.9 percent from 2.1 percent, while Fitch Solutions has reduced its growth estimate by 0.3 percentage point to 2.2 percent from 2.5 percent forecast earlier. (Yonhap)