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BOK’s Lee says rebound in chips will take time

Despite headwinds for economy, it’s not time for a rate cut, he says

Apr 02,2019
The chief of Korea’s central bank is worried about the downturn in the semiconductor industry and doesn’t think it will end soon.

“Worries over semiconductor exports have widened,” said Governor Lee Ju-yeol of the Bank of Korea (BOK) during a luncheon on Monday.

“There is a forecast that the semiconductor industry will recover, but the timeframe keeps being pushed back to later than the second half of this year,” Lee said.

Drooping chip prices have affected the earnings of the country’s tech giants - Samsung Electronics and SK Hynix.

Samsung Electronics warned investors of its dim prospects last week for the first quarter, saying that its performance will likely undershoot market expectations.

This is the first time that the company released such an alert ahead of an earnings announcement.

Local analysts’ consensus for the company’s first quarter profit was 7.84 trillion won ($6.9 billion), down 49.88 percent from last year, according to stock information provider FnGuide. Revenues were projected at 53.66 trillion won, an 11.4-percent year-on-year drop.

On top of the concerns about declining exports, Lee went on to outline a set of headwinds facing the Korean economy, including the trade dispute between the United States and China and uncertainties surrounding Brexit.

As to whether the downside risks will lead the central bank to lower its forecast for 2019’s economic growth, Lee declined to answer.

The BOK is scheduled to announce an interest rate decision and revised economic projection on April 18 if it deems a change is needed.

In January, the central bank cut its projection for the growth of gross domestic product by 0.1 percentage points from 2.7 percent to 2.6 percent. It estimated 2020 growth at 2.6 percent.

Other economic institutes have lowered their outlooks amid mixed economic indicators.

Moody’s further lowered its growth outlook to 2.1 percent earlier this year, down from 2.3 percent in November.

Sluggish exports led some analysts to forecast that the BOK could consider lowering the interest rate.

The governor, however, maintained the previous stance of not calling for a rate cut.

“Now is not the time for a rate cut,” he said.


BY PARK EUN-JEE [park.eunjee@joongang.co.kr]


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