The Bank of Korea (BOK) recently held the base rate at 3.5 percent, indicating the central bank’s difficulty in adjusting rates due to the fragility of the economy. Prices have been stabilizing, but the economy is still weak. The Korea Development Institute claims the economy is bottoming out, but the government predicts a growth of only 1.4 percent. The BOK is unlikely to reduce the benchmark rate to stimulate the economy since energy and utility rates remain volatile, and household debt is increasing. The gap between Korean and U.S. interest rates is expected to widen even more this month, which could lead to capital flight from the domestic market. Exports are still declining, and the reopening of China has not yielded the expected results. Korea is facing stiff competition from China, and governments are intervening more in industrial policies. To fight these challenges, the government and companies must work together and maintain close communication and cooperation.
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