(ATTN: ADDS BOK chief’s remarks, details in paras 3-6; TRIMS)
By Kim Deok-hyun
SEOUL, April 15 (Yonhap) — South Korea’s central bank on Thursday held its benchmark policy rate unchanged at a record low of 0.5 percent, as an economic recovery remained patchy and the country is at risk of being hit with another wave of COVID-19 infections.
As widely expected, the monetary policy board of the Bank of Korea (BOK) voted to leave the base rate steady in this year’s third rate-setting meeting.
After the monetary policy meeting, BOK Gov. Lee Ju-yeol said it is too early to discuss the monetary policy changes, citing a high level of economic uncertainty, including a prolonged spread of COVID-19.
However, Lee said the growth pace of the Korean economy is expected to be higher than the BOK’s projection of 3 percent, led by exports and facility investment.
“Economic growth could be around mid-3 percent this year,” Lee said, adding that Thursday’s decision was unanimous.
There is a possibility of inflation exceeding the February projection of 1.3 percent, as agricultural prices and international oil prices are forecast to rise further than previously expected, Lee said.
In February, the BOK froze the key rate as economic uncertainty heightened amid a flare-up in new coronavirus cases.
To bolster the pandemic-hit economy, the BOK slashed the key rate to the all-time low of 0.5 percent in May last year after delivering an emergency rate cut of half a percentage point.
Despite signs of a recovery in exports, weaker consumption has weighed on employment and increased pressure on policymakers.
This week, the nation’s daily virus tally hit the highest level in more than three months as cluster infections continued to emerge in the greater Seoul area.
“While the Korean economic recovery is expected to strengthen gradually, there is still a high level of uncertainty surrounding the path of COVID-19 and inflationary pressures on the demand side are forecast to be modest,” the BOK said in a statement. “Thus, the Board will maintain its accommodative stance of monetary policy.”
South Korea’s economy contracted 1 percent last year, marking the worst performance in over two decades, but it appears to have returned to a growth track on the back of a mild recovery in exports.
Exports grew 16.6 percent on-year to US$53.8 billion in March, helped by solid demand for chips and autos, to extend their gains for the fifth consecutive month.
Imports rose 18.8 percent to $49.6 billion, resulting in a trade surplus of $4.17 billion. It marked the 11th consecutive month for the country to post a trade surplus.
The number of employed people reached 26.9 million last month, 314,000 more than a year earlier, according to the data compiled by Statistics Korea.
It marked the first time that South Korea’s economy added jobs since February 2020, when the number of employed people grew by 492,000.