As Koreans struggle to shake off the shock of a nationwide data breach, a think tank on Wednesday predicted the local banking sector was likely to grow in 2014 amid signs of a global economic recovery and a bullish outlook for the export-driven country’s economy.
“The country’s economy is now on an upward trend and also the inflation is also expected to gradually rise,” according to Yun Chang-hyun, president of the Korea Institute of Finance.
The Bank of Korea predicts Korea’s economy will grow 3.8 percent this year, its fastest pace in four years, and the International Monetary Fund also raised its global growth forecast for the country, for the first time in nearly two years on Tuesday.
“Given these signs, the central bank will set a higher interest rate this year,” he told The Korea Herald during a meeting the media on Wednesday.
The remarks, despite its positive nature, were viewed by some in the financial sector as an attempt to divert the public’s attention amid the massive data breach that occurred in the nation’s financial sector last week.
“The timing was obvious,” said one brokerage sector executive, who declined to be identified.
Korean banks’ net income is largely dependent on interest income and the higher benchmark interest rate will help generate around 7 trillion won ($6.6 billion) this year, up from some 5.3 trillion in 2013, the think-tank said in a study released Wednesday.
The global financial crisis put a dent in the banking industry worldwide, and its aftermath did help reduce Korean banks’ total assets in 2009.
However, the Korean banking sector has since regained its growth momentum and shown numerous signs of recovery from the crisis, he said.
The assets of Korean banks will also see a modest increase, the institute said. As of September 2013, the total assets of local lenders stood at 2,079 trillion won, and it would increase about 4 percent this year.
By Oh Kyu-wook (firstname.lastname@example.org