The U.S.-China trade dispute has cost South Korea point-four percentage points of economic growth this year.
Lee Ju-yeol, the Governor of the Bank of Korea, said during a press conference in Washington on Friday local time, that half of the decrease was caused by a drop in exports due to tariffs imposed between Washington and Beijing.
He said the remaining half is due to a slowdown in investment and consumption because of the economic uncertainties caused by the trade spat.
Lee explained that South Korea cannot avoid the effects of the trade war as a large amount of its exports go to the U.S. and China.
In the first 20 days of October alone, South Korea saw a 19.5 percent decrease in exports on-year, with semiconductor exports to China falling 20 percent on-year.
The IMF also expects South Korea to suffer most from the trade dispute.
But the country's economic growth rate is expected to increase next year.
Lee said there are predictions that the worst has been avoided with the two economic superpowers reaching a phase one partial trade agreement, and he added that the semiconductor business will also begin to recover from the middle of next year.
Regarding interest rate cuts, Lee said that they are being careful in deciding whether to implement an additional cut because the interest rate is already low.
He explained that it's very important for the central bank to have policy measures to counter a recession if it arrives.
Regarding the inflation rate, the Bank of Korea expects it to be at around zero percent for the next one or two months.
The low inflation rate has become a headache not just for the central bank but for the entire world to the point that it cannot be controlled through monetary policy.
Instead, a harmonious mix of fiscal and monetary policy is needed for a macroeconomic stability.
Hong Yoo, Arirang News.