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BOK raises 2018 GDP forecast to 3%

The Bank of Korea on Thursday raised its economic growth forecast for this year on expectations of continued domestic demand recovery and robust export growth.

The central bank forecast that South Korea's gross domestic product will grow 3 percent in 2018, faster than its previous estimate of 2.9 percent, BOK Gov. Lee Ju-yeol told reporters.

The BOK left its base rate unchanged earlier in the day, saying it "judges that the solid trend of domestic economic growth has continued as exports have sustained their buoyancy and consumption has improved moderately, although investment has slowed somewhat." 


The latest GDP forecast for Asia's fourth-largest economy is in line with the government's economic outlook.

Lee said the BOK's decision to freeze the base rate was unanimous.

The BOK decided to raise the GDP forecast as exports are likely to sustain favorable movements thanks to the buoyancy of the global economy, Lee said.

In its economic outlook for this year, the BOK said the domestic economy will continue to show robust signs of recovery due to a global economic expansion.

"The global economy will continue to expand, as most advanced economies sustain their solid growth and emerging market economies, such as India and Brazil, show increasing growth momentum," the BOK said.

"Taking into account recent changes in global and domestic economic conditions, annual real GDP is projected to increase by 3 percent in 2018 and by 2.9 percent in 2019," it said.

Consumer prices are expected to rise by 1.7 percent this year and by 2 percent next year, it said.

With regard to the recent price fluctuation of cryptocurrencies, Lee said such developments are unlikely to undermine the nation's financial soundness.

In July last year, the government decided to raise the minimum wage by 16 percent to 7,530 won ($6.60) for this year, marking the biggest jump in about two decades.

Lee said it remains to be seen how the wage hike would impact consumer prices and overall economic growth.

South Korea is set to host the 2018 Winter Olympics next month.

Chang Min, the BOK's director general for research bureau, told reporters that the PyeongChang Olympics is expected to boost private consumption by 0.1 percentage point during the first-quarter of this year.

The easing of geopolitical risks is also likely to have a positive impact on the South Korean economy as North Korea agreed to send athletes and delegation to the Winter Olympics, Chang said.(Yonhap)