Bank of Korea Governor Warns of Low Growth Potential Due to Internal Factors
Bank of Korea Governor Lee Chang-yong has expressed concern over the possibility of low growth in Korea, citing internal factors such as a low birth rate and aging population. In an interview with CNBC during his visit to Marrakech, Morocco for a meeting of finance ministers and central bank governors, Governor Lee emphasized that Korea may not be affected by global factors in the same way as other countries.
Highlighting the significant challenges posed by a low birth rate and rapidly aging population, Governor Lee stressed the need to assess the impact of these factors on the country’s growth potential, along with the effects of prolonged high interest rates. This recognition of the complex dynamics at play demonstrates Governor Lee’s understanding of the nuanced economic landscape.
Regarding Korea’s economic growth rate, Governor Lee concurred with the International Monetary Fund’s forecast of 2.2% for next year, aligning with the Bank of Korea’s opinion. He also emphasized the importance of considering variables such as China’s economic situation and oil prices when assessing the country’s economic prospects.
Falling Prices and Inflation Expectations
On the domestic front, Governor Lee acknowledged that prices in Korea have fallen at a faster pace compared to other nations. Looking ahead, he projected that the inflation rate would decline to around 3% by year-end, aiming to reach the target level of 2% in the coming year. With this cautious outlook, Governor Lee demonstrates his attentiveness to price stability and the central bank’s commitment to achieving their monetary policy objectives.
Bank of Korea Governor Lee Chang-yong (Photo = Yonhap News)
Bank of Korea Governor Lee Chang-yong said on the 11th, “There is a possibility of low growth in Korea due to internal factors,” and expressed concern about the impact of a low birth rate and aging.
Governor Lee said this in an interview with CNBC in the United States in Marrakech, Morocco, where he was visiting to attend a meeting of finance ministers and central bank governors of the G20 and the annual joint general meeting of the International Monetary Fund (IMF). and the World Bank (WBG).
Governor Lee predicted that Korea “would not be a typical case” of being affected by global factors such as prolonged high interest rates.
He continued, “Korea has a very low birth rate and the aging population is developing rapidly. We need to see how the reduction in growth potential due to a low birth rate and ageing, together with the factors of prolonged high interest rates, will play out. “
Regarding Korea’s economic growth rate, Governor Lee said, “The IMF presented next year’s growth rate forecast as 2.2%, which is similar to the opinion of the Bank of Korea,” and mentioned China’s economic situation and oil prices as variables.
Regarding the domestic price forecast, he said, “Prices have fallen faster compared to other countries,” and “the inflation rate will fall to around 3% by the end of this year, and we will be able to reach the target level ( 2%) next year.”
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