Bank of Korea Maintains Economic Growth Forecast at 2.1% for This Year (Update)

The Bank of Korea maintained its forecast for this year's real Gross Domestic Product (GDP) growth rate at 2.1%.

In the revised economic outlook announced on the 22nd, the Bank of Korea expected the South Korean economy to grow by 2.1% this year. The Bank had predicted a 2.1% growth for this year in November last year and has maintained this forecast.

In the Monetary Policy Committee resolution from the policy direction meeting held in January, the Bank of Korea projected that although the recovery in domestic consumption and construction investment would be slow, the continued increase in exports would sustain an improving trend. Last year, South Korea's economic growth rate was 1.4%, and this year, growth is expected to improve mainly driven by exports.

Bank of Korea Governor Lee Chang-yong is presiding over the Monetary Policy Committee meeting held at the Bank of Korea in Jung-gu, Seoul, on the morning of the 22nd. (Photo by Bank of Korea)

The Bank of Korea's growth forecast for this year is slightly lower than those of the government and major domestic and international research institutions. The government expects the South Korean economy to grow by 2.2% this year. The Korea Development Institute (KDI) and the Organisation for Economic Co-operation and Development (OECD) also forecast 2.2%, while the International Monetary Fund (IMF) projects a slightly higher 2.3%.

On the same day, the Bank of Korea also maintained its consumer price inflation forecast for this year at 2.6%. Last year, South Korea's consumer price inflation rate was 3.6%. It predicted a slowdown in inflation due to sluggish domestic demand, including investment and consumption.

The Monetary Policy Committee expects domestic inflation to continue its slowing trend, but the pace of deceleration is anticipated to be gradual due to the ripple effects of accumulated cost pressures. It assessed that there is high uncertainty regarding the inflation path related to movements in international oil prices, agricultural product prices, and domestic and international economic conditions.