The Bank of Korea (BOK) on Thursday projected the country’s economy to shrink 0.2 percent this year, which would be the first contraction since 1998 in the wake of the Asian financial crisis.

The downgrade was issued after a monetary policy meeting that cut the policy rate by 25 basis points to a fresh record low of 0.50 percent.

The markets slightly dipped from the grim outlook. The benchmark Kospi closed Thursday down 0.13 percent at 2,028.54 and the junior Kosdaq 2.19 percent lower at 708.75.

The BOK in February had predicted Korea’s gross domestic product this year to expand 2.1 percent but slashed its estimates in line with other institutions after the first-quarter GDP contracted 1.4 percent.

South Korea has experienced negative growth only twice, sliding 1.6 percent in 1980 after the oil crisis and dipping 5.1 percent in 1998 following an international bailout amid the Asian currency crisis.

The last time the central bank estimated a contraction was in the wake of the global financial meltdown in 2009, but the country managed to end the year with 0.2 percent growth.

The BOK expected the Korean economy to rebound 3.1 percent in 2021. Inflation was forecast at 0.3 percent this year and 1.1 percent in 2021.

Data on the economic toll of the pandemic has been rolling in since last month.

Korea’s GDP growth in the first quarter fell 1.4 percent from the previous three months, the lowest in more than 11 years. Exports in April plunged 24.3 percent on year, with outbound shipments in the first 20 days of May also down by 20.3 percent.

By Kim Hyo-jin

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]