Bank of Korea revises up Korea's growth target

By Kim Yoo-chul

The central bank revised up its growth outlook for the country's economy this year, reflecting expectations that demand for IT products will remain strong with investments in related facilities growing.

Bank of Korea (BOK) Governor Lee Ju-yeol told reporters, Thursday, he views a lot of quite favorable “external factors” in terms of helping the country's economy, Asia's fourth-largest, beat the earlier market forecast.

Specifically, the central bank chief said South Korea's economy could reach the “mid-3 percent” level this year from an earlier projection of 3 percent it presented back in February. As widely expected, the BOK left its benchmark rate unchanged at a record 0.5 percent this month.

“When it comes to the growth rate curve during the first three months of this year, the growth pace of the country's economy will run faster than expected earlier. Thus, it seems achievable for the economy to reach a mid-3 percent level in terms of annual growth rate this year,” Lee told reporters in a briefing after holding its policy rate steady.

The BOK chief added he was expecting the COVID-19 situation won't get worse. “While the vaccination rate is low, given the government's efforts for a speedy rollout, consumer spending will be on a growth trajectory.”

The BOK also reaffirmed it won't change its “accommodative monetary easing” position because it needs to have clear cues on any potential momentum for an economic recovery in accordance with the unfolding of the COVID-19 situation.

With daily new infections coming in around 700 recently, there are concerns over a possible fresh wave of infections, which possibly could hurt the looming revival in consumer spending.

Regarding the widened spread between bond and equity markets, the BOK chief said it will be monitoring the trends in market yields and the BOK's policy lending costs. But he didn't discuss the possibility of making additional bond-purchasing campaign. So far this year, it bought 2 trillion won worth of government bonds. The BOK earlier said it plans to buy 5 trillion won and 7 trillion won in bonds in the first half of this year.

With regard to the issue of the recent steep rise of bitcoin prices, Lee said the BOK is regarding this as a “worrisome trend.” From the standpoint of financial stability, any excessive investment in cryptocurrencies could prompt financial risks.