BOK ups inflation estimate to 5.2% and cuts GDP growth outlook to 2.6% for this year

[Graphics by Song Ji-yoon]

The Bank of Korea on Thursday hoisted up the outlook for annual inflation rate to 5.2 percent from 4.5 percent estimated earlier in the year, while slightly paring economic growth estimate to 2.6 percent from 2.7 percent amid deteriorated external trade environment.

Under the revised outlook, the BOK projected this year’s annual inflation to rise 5.2 percent, which would be the steepest in 24 years, and next year’s 3.7 percent, also raised from earlier 2.9 percent forecast.

The economy would gain 2.6 percent this year, slower than 2.7 percent estimated in May amid slowed exports. The growth estimate for 2023 was 2.1 percent, also revised down from 2.4 percent earlier.

“Despite growing downside for the economy and uncertainties in external and domestic conditions, the monetary policy board deems it is necessary to continue with interest rate increases as consumer prices are expected to keep to high levels of 5 to 6 percent for some time,” the BOK said in a statement after the monetary policy meeting that delivered the fifth hike for the year to place the base rate at a nine-year high of 2.50 percent.

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