The Bank of Korea (BOK) said on the 27th it will sharply raise its economic growth forecast for this year to 3.3% from 2.6%, and for next year to 2.9% from 2.1%. The BOK's growth forecasts for this year and next exceed those of major domestic and overseas institutions.

Shin Hyun-song, Governor of the Bank of Korea, attends the plenary session of the Bank of Korea's monetary policy committee at the Bank of Korea in Jung District, Seoul, on the 27th. /Courtesy of Yonhap News

The Bank of Korea (BOK) raised its benchmark interest rate to 3% from 2.75% a year on the day. It was the second straight month of rate hikes after last month. The last time the BOK undertook consecutive hikes was during the COVID-19 period, from April 2022 to January 2023.

The Bank of Korea (BOK) raised rates to ease heightened inflationary pressure after the Middle East war. It is also related to the upward revision of the growth forecast announced the same day. When macroeconomic indicators are weak, raising rates is more burdensome, but that is not the case now.

The Bank of Korea (BOK) raised the growth outlook on the day because exports are surging, led by large companies such as Samsung Electronics and SK hynix amid a recent semiconductor boom. Leading economic experts expect the semiconductor cycle to continue through the second half of next year.

If this year's 3.3% growth materializes, it would be the highest in five years since 2021 (4.6%), when the growth rate improved sharply due to the COVID-19 base effect.

Earlier, the Bank of Korea (BOK) released its advance estimate for second-quarter real gross domestic product (GDP) growth at 0.6%, surpassing the BOK's May projection of 0.2%. The growth rate improved from -0.1% in the fourth quarter of last year to 1.8% in the first quarter of this year, and it posted another solid reading in the second quarter.

The cumulative current account surplus for January–June this year was $191.01 billion, the largest ever for a half-year period.

The Bank of Korea (BOK) also kept its consumer price inflation forecasts at 2.7% for this year and 2.3% for next year on the day. In addition, it raised the core inflation rate, excluding food and energy, to 2.5% from 2.4% for this year and to 2.5% from 2.3% for next year.

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