Growth outlook for 2010 raised to 5.9 %

The central bank Monday upgraded its 2010 forecast for the local economy to an eight-year high of 5.9 percent and raised the inflation projection, giving weight to last week's rate hike.

The growth projection by the Bank of Korea (BOK) is up from a 5.2 percent estimate made in April. In the second half, Asia's fourth-largest economy is forecast to expand 4.5 percent from a year earlier after growing on-year 7.4 percent in the first six months of the year.

The revised 2010 growth forecast would mark the fastest expansion since 2002 when the economy grew 7.2 percent. It is also slightly higher than the government's recent projection of 5.8 percent for this year.

"The Korean economy is expected to maintain its upward trend into next year ... Consumer prices are expected to rise at a faster pace in the second half on demand-pull inflationary pressure," the central bank said in a statement.

In the second quarter, the Korean economy expanded 1.2 percent on-quarter, but its growth may slow down to 0.7 percent in the third quarter. The bank revised down its economic forecast for next year to 4.5 percent from 4.8 percent due to expected sharp growth for this year.

The growth revision came as the Korean economy is fast recovering on the back of robust exports and improving domestic demand, resulting in a series of recent upward forecasts by the government and international organizations. The International Monetary Fund (IMF) upgraded its 2010 outlook to 5.75 percent from its earlier forecast of 4.5 percent.