{"id":2208736,"date":"2025-03-14T08:00:52","date_gmt":"2025-03-13T23:00:52","guid":{"rendered":"https:\/\/koreapro.org\/?p=2208736"},"modified":"2025-03-13T18:07:58","modified_gmt":"2025-03-13T09:07:58","slug":"bank-of-korea-warns-growth-could-fall-to-1-4-if-us-trade-war-escalates","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2025\/03\/bank-of-korea-warns-growth-could-fall-to-1-4-if-us-trade-war-escalates\/","title":{"rendered":"Bank of Korea warns growth could fall to 1.4% if US trade war escalates"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The Bank of Korea (BOK) published its <\/span><a href=\"https:\/\/www.bok.or.kr\/portal\/bbs\/B0000156\/view.do?nttId=10090271&amp;searchCnd=1&amp;searchKwd=&amp;depth2=200699&amp;depth3=200067&amp;depth=200067&amp;pageUnit=10&amp;pageIndex=1&amp;programType=newsData&amp;menuNo=200067&amp;oldMenuNo=200067\"><span style=\"font-weight: 400;\">March 2025 Monetary and Credit Policy Report<\/span><\/a><span style=\"font-weight: 400;\"> on Thursday, assessing South Korea\u2019s financial conditions as neutral and signaling that further rate cuts are possible this year. The BOK introduced a new Financial Conditions Index (FCI-G)*, which measures the cumulative impact of financial variables on the GDP gap, alongside the existing FCI. The FCI-G shows that financial conditions are now mildly accommodative, even though the traditional FCI remains slightly tight. The BOK noted that financial easing since the start of the year has been driven by falling short-term rates and a rebound in stock prices.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The BOK confirmed that it has cut the benchmark rate by 0.75 percentage points since October and suggested the possibility of two to three additional rate cuts in 2025 to counter economic weakness. The report warns that South Korea\u2019s GDP growth could fall to 1.4% this year and next under a worst-case trade war scenario driven by U.S. tariffs. The BOK also flagged risks related to rising household debt and housing market instability, especially after Seoul lifted land transaction restrictions. Household debt-to-GDP has declined to 90.5% but could increase again if financial conditions ease further.\u00a0\u00a0<\/span><\/p>\n<p><b>WHY IT MATTERS<\/b><\/p>\n<p><span style=\"font-weight: 400;\">The BOK\u2019s signal of further rate cuts reflects mounting pressure to support South Korea\u2019s weakening economy amid growing global uncertainty. A slowdown in domestic demand, weak exports and rising geopolitical risks are weighing on South Korea\u2019s growth outlook. The BOK\u2019s move to cut rates while maintaining a cautious stance on financial stability suggests that policymakers are walking a fine line between stimulating growth and preventing asset bubbles or excessive debt accumulation.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The BOK&#8217;s assumption that U.S. tariffs could persist until 2026 underlines the long-term risks to South Korea\u2019s export-dependent economy. If tariffs on China and other trade deficit nations are increased and prolonged, South Korea\u2019s high exposure to global supply chains could lead to broader financial and industrial disruptions.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Household debt presents the most immediate domestic risk. While debt-to-GDP levels have improved, the combination of low interest rates, relaxed lending rules and higher housing demand could quickly reverse that trend. If the housing market heats up again due to easier credit and lifted transaction restrictions in Seoul, policymakers may face a difficult balancing act between supporting growth and containing inflation.<\/span><\/p>\n<div class=\"content-tags\"><a href=\"https:\/\/koreapro.org\/tag\/business-economy\/\"><span class=\"tag\">Business &amp; Economy<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"<p>The Bank of Korea (BOK) published its March 2025 Monetary and Credit Policy Report on Thursday, assessing South Korea\u2019s financial conditions as neutral and signaling that further rate cuts are possible this year. The BOK introduced a new Financial Conditions Index (FCI-G)*, which measures the cumulative impact of financial variables on the GDP gap, alongside [&hellip;]<\/p>\n","protected":false},"author":10407,"featured_media":2207983,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[30],"tags":[24],"class_list":["post-2208736","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-briefings","tag-business-economy"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Bank of Korea warns growth could fall to 1.4% if US trade war escalates - Korea Pro<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2025\/03\/bank-of-korea-warns-growth-could-fall-to-1-4-if-us-trade-war-escalates\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Bank of Korea warns growth could fall to 1.4% if US trade war escalates - Korea Pro\" \/>\n<meta property=\"og:description\" content=\"The Bank of Korea (BOK) published its March 2025 Monetary and Credit Policy Report on Thursday, assessing South Korea\u2019s financial conditions as neutral and signaling that further rate cuts are possible this year. 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