By Kang Seung-woo
Staff reporter
The Bank of Korea Monday raised its economic growth forecast for this year by 0.7 percentage points to 5.9 percent on the back of robust exports and improving domestic demand.
The revised forecast is also 0.1 percentage point higher than the finance ministry's projection last month.
The new figure represents the highest annual growth since 2002 when the economy grew 7.2 percent.
Asia's fourth-largest economy posted a 7.4 percent growth in the first half and is expected to expand 4.5 percent in the second, meaning an overall 5.9 percent growth for this year.
"The upward revision came as the economy performed better-than-expected in the first quarter and exports are forecast to remain brisk into the third quarter," Lee Sang-woo, director-general of the BOK's research department, said at a press conference.
"The recovery momentum by the private sector is likely to pick up with exports leading the growth," Lee said.
The BOK forecast that the economy would grow 4.5 percent next year - 3.5 percent in the first half and 5.0 percent in the second.
In its most recent report, the BOK raised its inflation forecast to 2.8 percent, up from its earlier estimate of 2.6 percent.
After adding 2.7 percent in the first half of this year, consumer prices are predicted to climb 3.0 percent in the latter half of the year.
The revision implies that there will be another rate hike in the coming months.
The central bank raised its key interest rate to 2.25 percent Friday, ending its 16-month-long consistency to a record-low level of 2 percent.
The central bank said that the rate increase would help tame inflationary pressures.