BOK chief warns of 'K-shaped' recovery with sector disparities, disconnect from public sentiment

Seoul, Jan 5 Bank of Korea (BOK) Governor Rhee Chang-yong said on Monday that economic polarisation and uncertainty are expected to persist this year, stressing the need for careful and balanced policymaking.

Rhee made the remarks during a meeting with the heads of financial companies and officials from relevant industries in Seoul, which was also attended by Financial Services Commission Chairman Lee Eog-weon and Financial Supervisory Service Governor Lee Chan-jin, reports Yonhap news agency.

"The economy is projected to post higher growth this year than last year, but a 'K-shaped' recovery marked by wide gaps among sectors is likely to create a significant disconnect between headline growth and how people actually feel the economy," Rhee said.

He pointed to uncertainties in the global trade environment and fiscal policies of major economies as major challenges, while noting that expectations for the global artificial intelligence (AI) industry could also be reassessed.

"The central bank will conduct monetary policy in a more fine-tuned manner, closely monitoring a range of economic indicators as heightened uncertainty is increasing trade-offs among key policy variables, such as economic growth, inflation and financial stability," Rhee added.

In its latest outlook released in November, the BOK forecast the local economy to grow 1.8 percent in 2026, accelerating from last year's projected 1 percent expansion.

Finance Minister Koo Yun-cheol said the government will work to promote balanced growth through "productive" finance, including a mega 150 trillion-won (US$103 billion) public growth fund and tax benefits for investors investing in the local capital market, in a message delivered by First Vice Finance Minister Lee Hyoung-il on his behalf at the meeting.

"The year 2026 must be the first year of the South Korean economy taking a great leap forward by rebounding its growth potential and overcoming (economic) polarization," Koo was quoted as saying, adding, "The role of finance is more important than ever."

To this end, Koo vowed efforts to eradicate stock manipulation, stabilize the foreign exchange market and reduce household debt.

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