South Korea's central bank on Thursday revised up this year's growth forecast to 2.6 percent from the previous 2.5 percent estimated three months earlier, as both exports and private consumption showed signs of recovery.
Bank of Korea (BOK) Governor Lee Ju-yeol made the announcement after the monetary policy meeting. It was the first time in three years that the central bank revised up its growth forecast. The BOK estimate was the same as those from the finance ministry and the International Monetary Fund (IMF).
The BOK outlook was even higher than the figures estimated by economic think tanks. Hyundai Research Institute and LG Economic Research Institute set its growth outlooks at 2.3 percent and 2.2 percent respectively, while the state-run Korea Development Institute (KDI) projected a 2.4 percent expansion.
Governor Lee said the recent economic growth momentum was expanded more or less owing to improved export and investment that would raise the first-quarter growth rate higher than the previous quarter.
Recent economic indicators showed signs of recovery. Exports, which account for about half of the economy, kept rising for five straight months through March when the overseas shipments posted a double-digit expansion. Retail sales, which reflect private consumption, increased 3.2 percent in February from a month earlier. Revenue in department stores grew 1.7 percent in March, with credit card usage recording a double-digit increase.
Confidence among South Korean consumers improved as political uncertainty eased following a historic ruling on March 10 to remove former President Park Geun-hye who was impeached in the parliament in December.
Despite the positive signals, the BOK governor and six other policy board members decided unanimously to hold the benchmark seven-day repurchase rate on hold at an all-time low of 1.25 percent. The policy rate remained at the level since June last year on worries about the protracted low-growth trend.
After peaking at 3.3 percent in 2014, the country's economic growth rate fell below 3 percent and remained at 2.8 percent both in 2015 and 2016.
The top central banker said the accommodative monetary policy stance would be maintained though any need to cut rates further declined. Meanwhile, the BOK's outlook for this year's headline inflation was also revised up to 1.9 percent from 1.8 percent forecast three months earlier. It was close to the bank's mid-term inflation target of 2 percent.
The BOK predicted a 6.3 percent expansion in facility investment in 2017, rebounding from a 2.3 percent decline in the previous year. Construction investment was forecast to rise 4.5 percent this year after surging 10.7 percent last year.
The outlook for this year's current account surplus was set at 75 billion U.S. dollars, down from 81 billion dollars forecast three months ago. It reflected worry about protectionist moves by the Trump administration.
The central bank expected exports to rise 3.3 percent this year, higher than a 2.2 percent growth tallied in the previous year.
Private consumption was forecast to grow 2.0 percent this year, after expanding 2.5 percent last year.
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