South Korea’s central bank said Friday that it plans to keep its monetary easing stance next year in a bid to support economic recovery.

“We plan to maintain a monetary easing stance to support recovery in economic growth and stabilize inflation at the target level of 2 percent,” the Bank of Korea said in its report outlining the direction of its monetary policy for 2020. 

“We expect South Korea’s economic growth rate to fall short of the potential growth rate and the momentum of inflation to weaken with a downward pressure from the supply side,” it added.

The BOK reiterated its stance of making decisions after tracking global risk factors, the country’s macroeconomy and situations surrounding financial stability.

Its statements indicate that the BOK’s stance has not changed after its “wait-and-see” mode since the Monetary Policy Board trimmed the base rate by 25 basis points to 1.25 percent in October. The move had come merely three months after cutting the rate to 1.5 percent in July.

On the country’s gross domestic product, it expected a 2 percent growth, but noted the uncertainties surrounding the “road to economic growth.”

“The equipment investment and exports will improve while consumer spending will recover in the second-half of next year,” the BOK said.

“But with actual growth hovering below the potential growth rate, the output gap is likely to be negative or only expand slightly.”

The output gap is an economic measure of the difference between the actual output of an economy and its potential output.

A negative output gap happens when actual output is less than what an economy can produce at full capacity. It also means that there is spare capacity due to weak demand.

By Jung Min-kyung (mkjung@heraldcorp.com)