International credit rating agency Fitch Ratings has projected that the Bank of Korea will lower its base rate from the current 2.75% per annum to 1.75% per annum by the end of the year.
Jeremy Zook, Fitch’s director of sovereign ratings for Asia-Pacific, announced this at the annual conference Fitch on Korea 2025 held at Conrad Hotel in Yeongdeungpo-gu, Seoul on April 25.
He stated, “As the Bank of Korea announced yesterday, growth forecasts are declining, with domestic demand such as consumption and investment showing weakness,” predicting that the central bank will implement accommodative monetary policy in response.
The previous day, the Bank of Korea announced that the preliminary real GDP growth rate for the first quarter was -0.2% compared to the previous quarter. The negative growth is attributed to the simultaneous weakness in domestic demand and exports.
Regarding this, Zook said, “Household loans are a major obstacle to monetary easing decisions, but the Bank of Korea will closely examine this,” and assessed that “inflation is being managed.” He added, “As households have cash to spend, and the labor market remains robust, coupled with the reduced debt repayment burden due to the base rate cut, there will be a slight rebound towards the end of the year.”
He viewed the Korean economy as particularly vulnerable to U.S.-originated tariffs. “If the Trump administration’s reciprocal tariffs are realized, it will have a significant impact on the Asia-Pacific region, which has many export-oriented countries and large exposure to the U.S. market,” he predicted. He continued, “Even excluding basic tariffs or reciprocal tariffs, Korea is subject to item-specific tariffs,” adding, “In the case of automobiles, which account for one-third of exports to the U.S., it will cause macroeconomic difficulties.”
He anticipated that the new government taking office after the presidential election on June 3 would implement expansionary fiscal policies.
Zook said, “It’s difficult to predict the election results in Korea,” but added, “Historically, when the Democratic Party is in power, fiscal policy has been expansionary,” predicting that “national debt will trend slightly upward.”
He also explained the decision to maintain Korea’s credit rating outlook as “Stable” in February, saying, “We confirmed that the external balance and fiscal balance are excellent despite political volatility,” and “We assessed that various institutions and systems in Korea have resilience.”
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