Bank heads predict lower growth this year

The heads of Korea’s top five commercial banks expect the country’s economy to grow at less than 3 percent this year and said that rate hikes post a major risk to financial markets, according to a survey published on Sunday.

Their economic projection is in line with the latest outlook by the Bank of Korea (BOK) for Asia’s fourth-largest economy.

Last week, the central bank adjusted its earlier growth forecast for the year down by 0.1 percentage point to 2.9 percent, citing rising economic uncertainties at home and abroad.

For 2019, the BOK also cut its growth estimate by 0.1 percentage point to 2.8 percent from its previous forecast.

The chiefs said exports will remain sound, but facility investment may be hurt sharply, according to the survey conducted by Yonhap News Agency.

“Construction and facility investment is suffering a slowdown, which paints a gloomy picture for the 3 percent economic growth for the year,” said Woori Bank president Sohn Tae-seung.

The survey also showed that widely expected rate hikes at home and abroad would become the biggest risks for the economy, as well as for companies and households.

The central bank froze its key rate for July last week at 1.5 percent, as the economy is showing signs of a slowdown and inflationary pressure remains low.

In November last year, Korea’s central bank adjusted the key rate up for the first time in more than six years, citing economic recovery.

In June, as widely expected, the U.S. Fed raised its rate by a quarter of a percentage point to a range of between 1.75 percent and 2 percent but indicated that two more rate hikes may come this year, though only one was previously predicted.

The BOK may raise its policy rate one or more times during the remainder of the year, which would put a greater financial burden on companies and already highly indebted households.

Yonhap