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Korea likely to grow closer to its potential growth rate in 2018: BOK chief

South Korea's central bank chief said Thursday that Asia's fourth-largest economy is expected to pull off growth close to its potential economic growth rate based on favorable global trade conditions.

"Despite many difficulties, the South Korean economy achieved 3 percent growth this year," Bank of Korea Gov. Lee Ju-yeol said at a meeting with economic experts and advisers. "For next year, the economy will expand at its potential growth rate if there are no unpredictable developments like those centered on North Korea. We will also reach closer to target inflation numbers."

But he pointed out some protracting risks, including widening trade protectionism and monetary normalization in the United States that may weigh down the economy next year, as well as issues like South Korea's low birthrate and household debt.

Last month, the BOK raised the key rate by a quarter percentage point to 1.5 percent for the first time in 6 1/2 years, citing favorable economic conditions and low inflation pressure.

The South Korean economy grew 1.5 percent in the third quarter of this year from a quarter earlier thanks to brisk overseas sales, raising hopes that the economy will easily meet the target growth of 3 percent for 2017.

Bank of Korea Gov. Lee Ju-yeol speaks at a meeting with economic experts and advisers in Seoul on Dec. 21, 2017. (Yonhap)
Bank of Korea Gov. Lee Ju-yeol speaks at a meeting with economic experts and advisers in Seoul on Dec. 21, 2017. (Yonhap)

In a separate dinner meeting held Wednesday, the BOK chief said the central bank is looking into the possible impact of virtual currencies on its monetary policies and financial stability, although cryptocurrencies are not legal tender.

"Looking at the recent global craze for cryptocurrencies, I am worried that there is some irrational exuberance caused by a prolonged money-easing trend," Lee said. "They are not legal tender. But the BOK is studying how the spread of cryptocurrencies will affect the monetary policy channels, payment system and financial stability."

Virtual currencies, such as bitcoin and ethereum, have gained rapid popularity in recent years among South Korean investors hoping to make quick money. The country is home to one of the world's biggest bitcoin exchanges, with about 1 million people estimated to have some of the best-known digital currencies.

South Korean financial watchdogs are moving to regulate the unguarded transactions of such virtual goods, including a move to ban them out right.

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