The sluggish data fueled expectations that the central bank will cut interest rates as early as next month and the government may seek an additional supplementary budget as US President Donald Trump’s tariffs are likely to push the trade-dependent economy into a recession.“We expect the BOK to cut rates in May and by a total of 75 basis points (bps) by the end of the year,” said ING senior economist Kang Min Joo in a note.“We expect the current government proposal of 12 trillion won ($8.4 billion) to increase slightly once passed before the presidential election.
Construction and facility investment dropped 3.2% and 2.1% in the first quarter, while private consumption fell 0.1% for the first time since the second quarter of 2024.“The Korean economy is effectively in a medium- to long-term recession,” said Lee Junghoon, an economist at Eugene Investment & Securities Co.“While the need for an active fiscal role is increasing, it is difficult to change many things with ad hoc policies.
EXPORTS DOWNExports fell 1.1% in the first quarter from the previous three months, logging the first decline since the third quarter of 2024, according to BOK data.“The economy was sluggish in the first quarter even before the tariff shock was factored in,” said JPMorgan Chief Korea Economist Park Seok Gil.
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