Rhee Chang-yong, governor of the Bank of Korea, projected that Korea's economic growth rate, which was only 1% last year, will improve significantly this year. He said that external uncertainties such as U.S. tariff policy remain, but a recovery in consumption and strong semiconductor sector conditions will support growth.
Rhee said at a briefing to the National Assembly's Planning and Finance Committee on the 23rd, "Despite uncertainties related to U.S. tariff policy, domestic demand is recovering on the back of solid consumer sentiment, and exports are also continuing to grow thanks to strong semiconductor sector conditions," adding, "The growth rate (this year) is expected to be considerably higher than last year."
According to the Bank of Korea, the consumer sentiment index rose from an average of 97.2 in the first half of last year to 110.6 in the second half. A reading above 100 means more respondents view the outlook positively. The DRAM supply-demand ratio, which shows supply relative to demand, widened from -0.5% in the first half of last year to -6.8% in the second half. It is expected to be -8.6% and -7.5% in the first and second halves of this year, respectively. This means supply continues to lag demand.
Prices were assessed to continue rising in the low 2% range. Rhee said, "The consumer price inflation rate will maintain a stable trend near the target level (2%)." However, he noted, "Trends in the exchange rate and the like are potential risk factors," adding, "The won-dollar exchange rate rose to the 1,480-won range after October last year and then saw the pace of increase slow due to year-end measures to stabilize foreign exchange supply and demand, but volatility remains high."
He assessed that stock prices and Treasury yields have become more volatile. He said, "Stock prices rose on improved semiconductor conditions, but volatility has increased recently on concerns about overheated investment in artificial intelligence (AI)," and "Treasury yields also rose considerably due to changes in expectations for monetary policy, shifts in funds, and external uncertainties."
Lastly, Rhee said, "Given that internal and external uncertainties remain high, we will determine the policy direction by comprehensively assessing the economy, prices, and financial stability conditions."