(Bloomberg) -- The Bank of Korea will probably cut its benchmark interest rate three times to shore up economic momentum next year amid signs an export boom may soften, a survey of economists showed Friday.
The central bank began its long-awaited policy pivot last week by cutting its rate by a quarter-percentage point to 3.25%. While Governor Rhee Chang-yong said the BOK would cautiously approach further easing, private economists now expect three rate cuts in 2025 rather than the two they previously envisioned in median estimates collected by Bloomberg.
Bloomberg’s latest survey is the first conducted since the pivot and sheds light on the trajectory of policy for 2025 when the boom in semiconductor exports may ease, making it tough for the trade-reliant economy to grow as fast as this year.
The US will also have a new president in office and may intensify its export curbs on China, which is South Korea’s biggest trading partner.
“South Korea’s growth spurt looks set to weaken in 2025,” Hyosung Kwon of Bloomberg Economics said. “Decelerations in the US and China will weigh on demand for its exports. The result of the US presidential election could also have a large impact on the trajectory of growth.”
The survey also showed the economic growth outlook among economists has turned less optimistic. For this year, their median forecast slid from 2.5% to 2.4%. For next year, they saw a 2.1% expansion in a downward revision from 2.2%. Both forecasts, however, match the BOK’s latest projections.
The BOK next meets for a rate decision in November when the board is expected to hold its policy steady to assess the impact of the latest cut. Property prices and household debt are primary factors keeping the central bank wary of speeding up easing even as consumption remains stagnant and economic outlooks turn less upbeat.
“I gradually lowered South Korea’s economic growth rate and consumer price index growth rate,” Cho Yong-gu, a fixed-income strategist at Shinyoung Securities. “Accordingly, I expect the timing of base rate cut to accelerate.”
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