By Xu Aiying and Lee Jihae

The Bank of Korea has forecast economic growth this year to hit minus 0.2% due to the effects of the novel coronavirus disease (COVID-19) but rebound to 3.1% next year.

In a news release on May 28, the bank said it lowered its GDP growth outlook for this year by a whopping 2.3 percentage points from 2.1% to minus 0.2%. It raised its forecast for next year by seven-tenths of a point, however, from 2.4% to 3.1%.

On external conditions, the bank said not just the Korean economy, but also those of countries such as the U.S. and European Union nations suffered significant contractions in this year's first half due to the spread of COVID-19 and the ensuing lockdowns.

The U.S. economy shrank 1.2% in the first quarter this year from the fourth quarter last year due to a sharp drop in consumption, the bank added, saying growth in this year's second quarter also expected to see a significant decline due to containment measures that began from mid-March.

The eurozone was hit the hardest among major global economies, suffering a fall of 3.8% in the first quarter. The bank said a higher contraction was expected for the EU in the second quarter due to strict containment measures in place throughout April.

Japan's GDP in the first quarter contracted 0.9% from the previous quarter due to COVID-19, and the bank said the Japanese economy is expected to deteriorate further in the second quarter. The Chinese economy, however, was expected to recover from the shocks in the first quarter and continue growth thanks to government stimulus measures.

For the global economy, the central bank said recovery in the year's second half is expected to gradually improve as the responses to COVID-19 differ by country. For Korea, its economy was forecast to modestly recover with the slow easing of the slump in private consumption and goods exports.

xuaiy@korea.kr