SEOUL, May 28 (AJP) - The Bank of Korea (BOK) expects the economy to grow 2.6 percent this year, which would be the strongest in four years, and inflation to rise at the fastest post-pandemic pace due to energy shocks from the prolonged Gulf crisis.
The central bank on Thursday hiked its annual GDP growth projection from the previous 2.0 percent to 2.6 percent, marking the second consecutive upgrade following the BOK's move in February, when it revised the growth outlook upward from 1.8 percent to 2.0 percent.
The BOK projected the nation's economy to grow by 2.1 percent in 2027, indicating a normalization of growth trends after the current year's semiconductor-led spike.
Its inflation forecast was also sharply upped to 2.7 percent from 2 percent for 2026, reflecting the intensifying impact of the Strait of Hormuz blockade.
The upward revision is widely interpreted as a direct reflection of unexpectedly strong economic growth during the first quarter. Backed by a stellar performance in the semiconductor sector, Korea’s first-quarter GDP growth registered 1.7 percent, nearly doubling the initial market consensus of 0.9 percent.
For the following year, the central bank expects inflationary pressures to cool down slightly, forecasting an annual consumer price increase of 2.3 percent as supply-chain disruptions gradually stabilize.
When achieved, the growth this year would be the strongest since the post-pandemic year of 2022 and the inflation, the fastest since 3.6 percent in 2023.
Although the BOK held its benchmark interest rate steady at 2.5 percent on the same day, market analysts evaluate that the latest macroeconomic projections have substantially heightened the probability of monetary tightening in the latter half of the year.
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