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Economists see BOK raise 2021 growth forecast to some 4 percent

Economy 09:03 May 26, 2021

SEOUL, May 26 (Yonhap) -- The Bank of Korea (BOK) may raise its 2021 growth forecast to some 4 percent this week as exports showed signs of a strong recovery amid an aggressive fiscal stimulus, economists said Wednesday.

The BOK is widely expected to freeze its key rate at a record low of 0.5 percent at Thursday's monetary policy meeting, but market observers will closely monitor the central bank's revised growth outlook.

The BOK's February forecast was that South Korea's economy would grow 3 percent this year.

So far this year, South Korea's economic recovery has shown signs of gaining pace, helped by a strong rebound in exports.

Exports, which account for about half of the nation's gross domestic production, jumped 41.1 percent in April from a year earlier, extending their gains for a sixth month, as demand for chips and automobiles stayed strong amid the improving global economy.

Outbound shipments came to US$51.1 billion last month, compared with $36.2 billion a year earlier, according to government data.

In the first 20 days of May, exports soared 53.3 percent on-year on the back of robust demand for chips and automobiles.

This undated file photo shows ships carrying containers docked at a port in South Korea's southeastern city of Busan. (Yonhap)

Kim So-young, a professor of economics at Seoul National University, expected the BOK to raise this year's growth forecast to some 4 percent amid a mix of aggressive fiscal spending and loose monetary policy.

Economics professor Sung Tae-yoon of Yonsei University echoed the view, saying that South Korea's economy could grow some 4 percent this year as the global economic recovery is likely to speed up.

Earlier this month, President Moon Jae-in said the government will spare no efforts to achieve an economic growth of more than 4 percent this year.

"All government capabilities will be mobilized and private-sector vitality will be enhanced so that our economy will grow at more than 4 percent for the first time in 11 years," Moon said.

"We will ensure that aggressive expansionary fiscal spending spearheads the economic recovery and will prepare bold measures to boost consumption and domestic demand in step with how our epidemic prevention and control situation stabilizes," Moon said.

Some local think tanks and foreign investment banks already revised up their 2021 growth outlook for the Korean economy to near or above 4 percent.

The Korea Institute of Finance (KIF) forecast the Korean economy to grow 4.1 percent this year, up 1.2 percentage points from its previous estimate.

JP Morgan revised up its growth forecast for Korea to 4.6 percent from 4.1 percent.

South Korea's economy grew 1.6 percent in the January-March period from three months earlier, accelerating from a 1.2 percent on-quarter gain in the fourth quarter of last year.

The Korean economy contracted 1 percent last year amid the COVID-19 pandemic, the first yearly retreat since the 1997-98 Asian financial crisis. But it contracted by a far smaller margin than other major economies.

kdh@yna.co.kr
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