BOK governor says uncertainties will grow in second half of year

[THE INVESTOR] Bank of Korea Gov. Lee Ju-yeol said Wednesday that the Korean economy is expected to see increasing external and internal uncertainties in the second half of the year.

He pointed out that the U.K.’s referendum result on Britain’s exit from the European Union could further spur volatility in the global financial market, during a meeting with economic experts held at the central bank’s headquarters in Seoul. 

Lee also expressed concerns that the U.S. Federal Reserve is still likely to hike interest rates once or twice this year which could aggravate uncertainty for BOK’s monetary policy making.

Internally, the ongoing restructuring in the financially troubled shipping and shipbuilding companies is the biggest factor that will weigh on the Korean economy.

“The impact of corporate restructuring will be gradually realized, like the unemployment rate in North Gyeongsang Province jumped in May,” Lee said.

North Gyeongsang Province is where major shipbuilders conducting massive layoffs are located, including Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries.

“We need to stay alert about forthcoming economic and financial situations although we expect that the shocks stemming from internal and external factors will be mitigated with active fiscal policies, followed by the Monetary Policy Committee’s key rate cut,” he said.

On June 9, the BOK slashed its policy rate by 25 basis points to a record-low of 1.25 percent, marking the first rate cut in 12 months.

By Park Han-na (hnpark@heraldcorp.com)