Despite the bounce-back in the third-quarter gross domestic product, some global investment banks’ outlook on the Korean economy still remains “pessimistic.”
In addition, there are projections that the Bank of Korea could choose to conduct an interest rate cut once more early next year due to weak improvements in a variety of indexes.
BNP Paribas economist Mark Walton said in a report -- released Friday -- that questions remain over the sustainability of the third-quarter growth.
“Weak external demand, highlighted by slowing Chinese output, and a problematic exchange rate point to further export shrinkage following the third quarter’s 0.2 percent contraction,” he said.
He also said that domestic demand is set to grow more slowly from the fourth quarter onwards “as the impetus of the post-Middle East respiratory syndrome rebound fades and longer-term structural impediments remain.”
Predicting that inflation is likely to continue to disappoint BOK expectations, he raised the feasibility that the central bank could resume monetary easing -- lowering the base rate, which is set at the record low of 1.5 percent -- during the first quarter of 2016.
“Delayed Fed lift-off until at least March, as we now expect, will encourage a cut (in Korea),” said Walton.
His report came a day after the Federal Reserve hinted at a hike in the U.S. key rate within the year. BNP Paribas is one of the few IBs that downplayed the possibility.
Local analysts agree that it would be difficult for the BOK to push for a cut if the U.S. Fed raises its rate in the December meeting.
Meanwhile, Korea saw its industrial output grow by 2.4 percent growth in September, compared to the previous month.
This is the highest growth in 54 months since the rate peaked at 4 percent in March 2011, Statistics Korea said on the same day.
After dropping between March and May, the industrial output has increased for the fourth consecutive month from June.
“Exports were down in September, but overseas shipments of mobile devices like system chips actually rose that propped up production,” said an official of the state statistical agency.
He said that automobiles sales were spurred by the popularity of new models and excise tax cuts implemented by the government to fuel domestic consumption.
