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(News Focus) Upgraded growth outlook buoys hopes for further rebound

All News 19:00 April 13, 2017

By Kim Kwang-tae

SEOUL, April 13 (Yonhap) -- South Korea's central bank on Thursday raised its growth outlook for 2017 the first time it took such a step in three years, leaving many to expect Asia's No. 4 economy to continue to grow with the help of exports.

The Bank of Korea revised up its growth outlook to 2.6 percent from its previous estimate of 2.5 percent released in January. The BOK kept its key interest rate unchanged at 1.25 percent as widely expected.

The central bank even expects the Korean economy to grow 2.9 percent in 2018, as the global economy, particularly the U.S. economy, is on a recovery path.

On top of the positive external factors, improving exports have delivered a ray of hope to the export-oriented country which has been coping with slowdowns in growth since the 2008 financial crisis, experts here said.

(News Focus) Upgraded growth outlook buoys hopes for further rebound - 1

South Korea's exports jumped nearly 14 percent to US$48.9 billion in March from $42.98 billion a year earlier, according to the trade ministry. The country's exports have continued to rise since November mainly because of rising oil prices.

An increase in crude prices helps local oil refiners sell their products at higher prices in overseas markets. The average oil price was $41 last year and the price is expected to average at $54 in the first quarter of this year, analysts said. Refined oil products like gasoline are major export items for South Korea along with more high-profile goods such as cars, consumer electronincs, steel and ships.

Local analysts picked the global economic recovery as the major reason behind the central bank's upward revision of its growth outlook for this year.

"The BOK appears to have made an upward revision by taking into account the global economic recovery and increased gains from equity investments in stock markets," said Choi Un-sun, an analyst at Cape Investment & Securities.

The central bank said it expects exports to sustain their trend of improvement due mainly to the rise in demand for goods and services worldwide while private consumption is expected to recover at a more moderate pace. It cited general improvement in consumer sentiment and the government's efforts to boost spending as contributing factors for the economy.

The government is offering subsidies for new car purchases up till June of this year and plans to provide a variety of stimulus packages to support growth.

The country's facility investments are projected to jump 6.3 percent this year in contrast with the negative growth of 2.3 percent a year earlier. Goods exports are expected to rise 3.3 percent this year, higher than the previous year's 2.2 percent growth, the BOK said.

In regards to downside risks, the BOK expected the country's current account surplus to narrow to $75 billion this year, down from its previous estimate of $81 billion released in January.

The U.S. trade protectionism was factored in the central bank's forecast although outbound shipments will continue to improve.

"The improvements in global economic conditions and an upturn in the information technology industry will drive a surge in investment demand, while the high external uncertainties related to deepening trade protectionism may work as downside risks," the BOK said in a report on the 2017 economic outlook.


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