BOK chief expects Korea not to see deflation in near future
The head of the Bank of Korea (BOK) has dismissed the possibility of deflation in the near future but highlighted the need for more aggressive fiscal and monetary policies if necessary.
“As of now, there are no serious signs of deflation,” BOK Governor Lee Ju-yeol told a National Assembly audit after defining deflation as a steady drop in prices of “many products” for “at least several quarters.”
He also said that the ongoing slump facing Korea and the rest of the world is widely expected to continue for some time, but the duration and degree of its impact will largely depend on how the trade conflict between the world’s two largest economies will unfold.
“The growth of the global economy is slowing down,” Lee said.
“Such a slowdown is expected to continue for some time, and it seems the rate will be greatly affected by the outcome of the U.S.-China trade negotiations and the course of the Chinese economy based on that outcome.”
Lee noted the Korean economy faces increased uncertainties stemming from the U.S.-China trade dispute.
“It appears the local economy will continue to face increased uncertainties in the future due to the slowing growth of the global economy and a delayed recovery of the semiconductor market,” he said.
Korea’s exports have dropped for 10 consecutive months since December, partly led by significant cuts in outbound shipments of semiconductors, which account for nearly one quarter of its overall exports.
When asked later by Rep. Shim Jae-chul of the main opposition Liberty Korea Party, Lee said it “may not be easy to meet” the 2.2 percent growth target this year due to many negative but external factors, including the U.S.-China trade dispute.
The BOK has twice revised down its growth outlook for Asia’s fourth-largest economy this year from 2.6 percent in January to 2.5 percent April, then to 2.2 percent in July.