South Korea’s central bank chief said Thursday that the country’s economic growth is expected to fall short of earlier forecasts, citing sweeping U.S. tariff threats and lingering political uncertainty stemming from former President Yoon Suk Yeol’s martial law declaration.

President Donald Trump’s proposed 25% “reciprocal” tariffs have shaken South Korea’s export-driven economy, sending stock prices tumbling and weakening the Korean won to its lowest level since 2009.

The country is also grappling with the aftermath of Yoon’s controversial move in December to suspend civilian rule — a declaration that led to months of political turmoil, his eventual removal from office, and snap elections set for June 3.

“This year’s annual growth rate is now expected to fall short of the 1.5 percent forecast made in February,” Bank of Korea Governor Rhee Chang-yong said at a press conference.

“The tightening of tariff policies, which is much stronger than initially projected, will likely further weigh on growth prospects,” he added. “Political uncertainty has dragged on longer than expected, delaying the recovery of economic sentiment.”

Rhee also pointed to sluggish domestic demand and unusual disruptions, including large-scale wildfires in the country’s southeast in late March, as contributing factors to the economic slowdown.

Despite the headwinds, the central bank held its benchmark interest rate steady at 2.75% for a third consecutive decision, following a 0.25 percentage point cut in February.

Given the “significant uncertainty” posed by U.S. tariff threats and pending domestic stimulus efforts, the Bank of Korea said in a statement that “the board judged it appropriate to keep the base rate unchanged for now while closely assessing changes in domestic and external conditions.”

Rhee warned that the level of uncertainty tied to global trade tensions has reached an “unprecedented level.”

“The intensity of U.S. tariff policies and the swift shifts in responses from major economies are evolving so rapidly that it is currently difficult to even establish a baseline scenario for forecasts,” he said. “It feels as though we’ve suddenly entered a dark tunnel. In such dim conditions, the approach is to wait patiently until the light returns.”

Rhee also signaled that the central bank may consider further rate cuts in May but said any move would depend on ongoing assessments of domestic and global economic conditions.

Meanwhile, South Korea’s Finance Ministry said Wednesday that Finance Minister Choi Sang-mok is scheduled to meet with U.S. Treasury Secretary Scott Bessent next week to discuss trade issues.