Seoul, May 25 (IANS) South Korea’s central bank is expected to lower its 2025 growth outlook this week to below 1 percent amid sluggish domestic consumption and uncertainties stemming from shifting US trade policies, experts said on Sunday.

The Bank of Korea (BOK) is likely to revise down its gross domestic product (GDP) growth forecast from the current 1.5 percent to around 1 percent or lower at its upcoming rate-setting meeting Thursday, according to a recent Yonhap News Agency survey of seven economists.

Ongoing domestic political uncertainty, along with U.S.-driven tariff changes, is compounding challenges for Asia’s fourth-largest economy, which is already grappling with a slowdown, they said, reports Yonhap news agency.

The experts warned that the tariff shock initiated by the United States could drag down South Korea’s growth rate by as much as 0.5 percentage point this year.

Shinhan Securities and Kiwoom Securities forecast the BOK to lower its growth projection to 1 percent, while Nomura Securities projected a sharper cut to 0.8 percent, citing weak consumer spending, a prolonged construction sector slump and declining vehicle exports due to U.S. tariffs.

The Korea Development Institute (KDI) and the Korea Institute of Finance (KIF) also forecast the BOK to revise down its outlook to between 0.8 and 0.9 percent.

In contrast, the Hyundai Research Institute offered a more optimistic view, saying the impact on growth would be limited if U.S. tariffs are capped at around 10 percent.

“South Korea competes with other countries in the U.S. market, and 10 percent is almost the minimum,” the brokerage said.

Despite different growth projections, analysts agreed on the need for a sizable supplementary budget to stimulate corporate investment and consumer spending. They estimated a fiscal package of 10 to 30 trillion won would be appropriate to help revitalise the economy.

South Korea’s real GDP shrank 0.2 percent in the first quarter from three months earlier.

It was an unexpected contraction partly attributed to political instability following former President Yoon Suk Yeol’s brief imposition of martial law on December 3. Yoon was removed from office on April 4.

—IANS

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