Global investment banking and securities firm Goldman Sachs Group Inc. revealed that the Bank of Korea will cut interest rates as early as the second quarter of 2024. “The BOK could make up to three rate cuts over the course of 2024,” Goldman Sachs managing director Kwon Goo- hoon said at a press conference on macroeconomic outlook for 2024 held at the Goldman Sachs office in Seoul on Wednesday.

Amid a rebound in exports, less pressure on the foreign exchange market, and a smaller interest rate gap with the United States, the Korean central bank will focus its monetary policy on domestic demand and inflation, according to Kwon. Kwon is a senior Asia economist who analyzes and forecasts the macroeconomic outlooks for Korea, Malaysia, Singapore, Taiwan, and Thailand at Goldman Sachs.

He expects the European Central Bank to join the rate cut in the second quarter 2024, followed by the Bank of England in the third quarter and the Reserve Bank of Australia in the fourth quarter. “If the BOK cuts rates in the second quarter of 2024 as expected, two cuts are possible within the year,” he said. “If the U.S. Federal Reserve cuts rates before the fourth quarter, the BOK could even make an additional cut.”

Kwon’s outlook is based on optimism for exports next year, as he forecasts Korea’s nominal export growth at 9 to 10 percent for next year or double the Asian regional average of 4-5 percent. “Korea’s current account surplus was less than 1 percent of gross domestic product (GDP) in the first nine months of 2023, but we expect it to reach 3 percent in 2024,” he added. “In such a case, pressures will be eased from the foreign exchange market and the won-dollar exchange rate will be adjusted to around 1,250 won.”

Kwon cited global demand recovery, increased demand for artificial intelligence (AI)-related chips, and a supply chain reshuffle as reasons for the optimistic export performance.

“The electronics sectors that produce AI chips in Korea and Taiwan are already benefiting and will see even greater gains in 2024,” Kwon said. He sees demand normalizing globally after the Covid-19 pandemic and major countries looking to diversify their supply chains, creating opportunities for Korean semiconductor, battery, and electric vehicle manufacturers to expand exports.

By Jeon Hyung-min and Choi Jieun

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