SEOUL, May 2: The Bank of Korea estimates the potential rate at which the economy can grow without inflation pressures developing could be as low as just 3.3 percent based on 2010/12 data, it said in a report on Thursday.
Asia’s fourth-largest — but still-sluggish — economy would coincidentally post annual growth of 3.3 percent in the second half of this year, the central bank forecast in April.
Thursday’s report appears to support the view of BOK Governor Kim Choong-soo that further monetary policy easing was not urgently needed as long as South Korea’s economy is on a recovery path and headed toward the potential growth rate.
At its April 11 meeting, Governor Kim used his casting vote power to keep interest rates unchanged, despite political pressure for easing and after the other six rate-setting members were equally split between no change and a cut.
Thursday’s report, co-authored by four Bank of Korea officials, put the estimated potential growth rate for South Korea’s economy at between 3.3 percent and 3.8 percent on the basis of performance during the 2010-2012 period.
South Korea’s trade dependent-economy grew only 2 percent last year and is now seen as recovering at a much slower pace than had been thought late last year. The Bank of Korea forecasts this year’s growth at 2.6 percent.
Governor Kim has frequently stressed the importance of the potential growth rate as one of the factors that the seven-member monetary policy committee considers before voting on the benchmark interest rate every month.
(AGENCIES)
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