BOK Governor Rhee outlines challenging 2026 economic outlook
Bank of Korea Governor Chang Yong Rhee delivered his New Year speech on January 2, 2026, outlining the challenging economic conditions of the past year and the persistent risks for 2026.
Navigating global trade and policy shifts
Bank of Korea Governor Chang Yong Rhee reflected on a challenging 2025, marked by negative growth in Q1 due to an unexpected political shock and aggressive US tariff measures.
The Bank of Korea responded by cutting the Base Rate twice in the first half, later holding it steady amid housing market instability and exchange rate volatility.
Looking to 2026, Governor Rhee highlighted persistent global trade uncertainties, including potential US tariff resurfacing and escalating US-China tensions.
Regarding the US investment agreement, Rhee stated, "this does not imply a mechanical annual outflow of USD 20 billion... the Bank of Korea... will ensure that the actual decided-upon investment flow does not compromise foreign exchange market stability.
" He also noted significant uncertainty surrounding major economies' monetary policies and fiscal soundness, flagging risks related to the global AI industry.
Domestic inflation, growth, and won volatility
Domestically, Governor Rhee noted consumer price inflation recently rose to the low-to-mid 2% range, but is expected to stabilize at 2.1% for 2026, similar to last year.
He cautioned that persistent exchange rate elevation could intensify inflationary pressures and highlighted the burden of living costs on low-income households, calling for structural reforms beyond monetary policy.
Growth is projected at 1.8% for 2026, led by the IT sector, but a 'K-shaped recovery' with widening disparities across sectors is a concern, necessitating continued structural reform efforts.
Addressing won misalignment and NPS impact
Governor Rhee critically stated that the won's recent level in the upper 1,400 range appears substantially misaligned with Korea's economic fundamentals, partly due to the 'Korea discount'.
He urged a comprehensive reassessment of the National Pension Service's overseas investments, which have created foreign exchange imbalances and one-sided depreciation expectations.
A new government-wide framework is essential to manage these macroeconomic implications and ensure market stability, preventing a recurring dilemma.
Source: 2026 New Year Speech by Governor Chang Yong Rhee
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