BOK to raise 2024 growth forecast on back of robust Q1 expansion

The Bank of Korea will raise the country's growth forecast for the year after economic growth outperformed expectations in the first quarter.

Bank of Korea Gov. Rhee Chang-yong speaks during a press conference held in Tbilisi, Georgia, on Thursday. [BANK OF KOREA]

Korea's growth forecast for this year will be adjusted upward following stronger-than-expected economic expansion in the first quarter, Bank of Korea (BOK) Gov. Rhee Chang-yong said, while the monetary policy will go through a “reassessment” as well.

“It is impossible not to adjust the GDP growth forecast upward — the question is how much,” the central bank chief told the press on Thursday during his trip to the country of Georgia for the annual Asian Development Bank meeting.

Korea’s GDP grew 1.3 percent in the January-March period from a quarter earlier according to advance estimates announced by the BOK on April 25, outpacing the market estimate of 0.6 percent expansion. It was the steepest growth since the 1.4 percent posted in the fourth quarter of 2021.

As such, the Organisation for Economic Cooperation and Development (OECD) lifted its growth forecast for Korea this year by 0.4 percentage points to 2.6 percent on Thursday as well.

“Domestic demand turned out to be stronger than expected,” noted Rhee.

“Robust GDP growth is good news; it should be reflected in our economic outlook adjustment, yet whether it will be as high as the OECD's adjustment or not depends on data."

The central bank's growth forecast for this year currently stands at 2.1 percent. The updated projection for this year will be announced on May 23.

Rhee also said that the monetary policy will go through a “reassessment,” noting that the recent changes in macroeconomic situations — delayed U.S. rate cuts, Korea's robust growth and increased volatility in oil prices and exchange rates following the armed conflict in the Middle East region — "hold significance to Korea's monetary policy."

Rhee said that “it is hard to say for sure what we are going to do from now on at this point,” and the central bank is “currently conducting a review of the issue.”

Moreover, the governor pointed out that structural reforms involving the pension system, education, and fiscal policy are “the only answer for driving Korea’s long-term growth.”

While acknowledging that “restructuring measures will not be able to satisfy everyone,” Rhee stressed that “we should not take it for granted that Korea’s growth rate will slump due to the aging of society — but it can be overcome by restructuring.”

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]