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BOK chief forecasts rosy mid-3% growth amid new virus concerns

Bank of Korea Gov. Lee Ju-yeol speaks during a press briefing held at the central bank headquarters in Seoul on Thursday. (Yonhap)
Bank of Korea Gov. Lee Ju-yeol speaks during a press briefing held at the central bank headquarters in Seoul on Thursday. (Yonhap)
South Korea’s central bank chief said Thursday that the nation’s economy is likely to expand in the mid-3 percent mark this year, rosier than its previous forecast in February. The bank also decided to keep its policy rate frozen at a record low of 0.5 percent on concerns of a looming fourth wave of the COVID-19 virus.

“The current situation surrounding both the global and the Korean economy show that the mid-3 percent growth for this year is a possible outcome,” Bank of Korea Gov. Lee Ju-yeol said in a press briefing following the bank’s monetary policy meeting.

In its previous forecast in February, the BOK posted the nation’s 2021 growth outlook at 3 percent.

“The global economy is seeing fast recovery with the US carrying out its massive stimulus package and the local economy is likely to gain further momentum backed by a rebound in exports and facility investments,” he added.

Despite that only 2.3 percent of the Korean population has received a COVID-19 vaccination so far since Feb. 26, the government has been making various efforts to get the job done in the second half of the year, Lee noted.

The mid-3 percent projection would hit its mark on conditions that the situation surrounding the economy and the pandemic won’t worsen and the nation’s vaccination would be carried out smoothly, Lee explained.

Thursday’s decision of maintaining the benchmark policy rate at a record low of 0.5 percent came amid growing uncertainties over looming infection cases.

The nation‘s daily virus cases this week hit their highest level in more than three months, pushing it to the verge of entering a fourth wave of the pandemic.

On its monetary policy stance, Lee said that “it is too early” to shift from the current dovish stance, hinting at the central bank’s willingness to maintain it for some time to help the economy see a “solid recovery.”

In a separate report released the same day, the BOK raised the possibility of inflation exceeding the February projection of 1.3 percent, backed by projections of soaring agricultural prices and international oil prices. But it continued to downplay it overall, adding that it will hover around the 2 percent mark before declining again.

Asia’s fourth-largest economy contracted 1 percent last year, marking its worst performance in over two decades.

Exports grew 16.6 percent on-year to $53.8 billion last month, gaining momentum for recovery for the fifth consecutive month.

By Jung Min-kyung (