S. Korea's monetary policy to focus on boosting economic recovery

Source:Xinhua Published: 2012-12-27 14:42:54

South Korea's monetary policy will focus on boosting economic recovery next year due to risk factors such as the eurozone fiscal crisis and the expected low-growth trend, central bank said Thursday.

"The bank will focus on preventing the continuation of low growth from dampening growth potential, while closely reviewing changes in financial and economic conditions at home and abroad as well as development in external risk factors such as the eurozone fiscal crisis," the Bank of Korea (BOK) said in a report for its 2013 monetary policy direction.

The report came amid a series of downgrades for 2013 growth outlook. The finance ministry slashed its 2013 growth outlook for South Korea to 3 percent from an earlier estimate of 4 percent on Thursday, citing external uncertainties such as the US fiscal cliff and the eurozone debt problem. The figure was lower than 3.1 percent by the Organization for Economic Cooperation and Development and 3.2 percent by the BOK.

The statistical agency forecast the country's economic growth potential will continue to fall from an annual average of 3.8 percent in the period between 2011 and 2020 to 2.9 percent for the 2021-2030 period, before dropping to 1.9 percent during the 10- year period through 2040.

Touching on inflation, the central bank noted that it will pay attention to anchor consumer price inflation within the mid-term inflation target range of 2.5-3.5 percent that was narrowed from a range of between 2 percent and 4 percent for the 2010-2012 period.

The BOK forecast that demand-side inflationary pressures will not be material in 2013 amid the low growth trend, repeating that the South Korean economy would sustain a negative output gap next year amid the modest economic recovery. The negative output gap means actual GDP growth stays below the one for potential GDP.

Meanwhile, the finance ministry expected the headline inflation to accelerate to 2.7 percent in 2013 from 2.2 percent in 2012 due to the low base effect and the expected rise in global grain prices.

Posted in: Economy

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