The Bank of Korea (BOK) on Thursday slightly raised its growth outlook for this year’s gross domestic product (GDP) to 2.6 percent from 2.5 percent last estimated in January citing signs of recovery led by electronic component exports and capital investment in IT sector as well as improved sentiment from reduced political instability.
It is the first time in three years that the BOK has revised up its annual GDP outlook. The BOK also has raised inflation estimate for this year to 1.9 percent from earlier 1.8 percent. Even after the upgrade, the economy would be slowing from 2.8 percent in 2015 and 2016.
“The economy is in a recovery phase. In the short run, prospects are bright, but uncertainties linger and there is the geopolitical risk,” BOK Governor Lee Ju-yeol told reporters after a monetary policy meeting that kept the policy interest rate unchanged at 1.25 percent since last cut in June last year.
On the same day, the BOK issued a report claiming that economic retaliation from China for the country’s deployment of U.S. Terminal High Altitude Area Defense (THAAD) system would pare Korea’s GDP growth rate this year by 0.2 percentage point and jobs by 25,000.
It based its estimation upon forecast of 30 percent plunge in Chinese tourists throughout the year and 2 percent drop in commodity exports to China.
Without the retaliation, Korea’s GDP could have grown 2.8 percent this year, given its recent upward revision.
The mild upgrade in GDP outlook comes after adjustment of 0.1 percentage point in fourth-quarter growth and increased spending in IT as well exports data. Sentiment has also improved after the impeached president was removed from office, setting the stage for next administration through snap election in May, he said.
Exports in March jumped 13.7 percent on year to reach $48.88 billion, extending double-digit growth for three consecutive months for the first time in five years and six months.
Payroll data showed a significant improvement in March with people with jobs increasing by the biggest number in 15 months. The employment rate rose 0.6 percentage point to 60.2 percent, the highest figure for March in 20 years.
By Boo Jang-won
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]