SEOUL: South Korea’s central bank raised its growth and inflation forecasts for this year amid signs of the economy gaining strength, which could pave the way for increasing interest rates in the future. The bank now expects South Korea’s gross domestic product to grow 3.0% in 2017, faster than its July estimate of 2.8%, Bank of Korea Gov. Lee Ju-yeol said Thursday. The bank also expects consumer prices will rise 2.0% this year, compared with the earlier projected pace of 1.9%, Mr. Lee said. The upgraded outlook came shortly after the bank, in a divided vote, decided to hold the policy rate at a record low 1.25%, with one dissenting member voting for a rate increase, Mr. Lee said. For next year, the bank expects the economy to expand 2.9%, he said.
South Korea’s export-led economy has continued its recovery in recent months as the global economy has improved. Exports, which account for about half of the country’s economic growth, posted double-digit growth for nine consecutive months on strengthening demand overseas. Overall inflation is hovering around the bank’s annual target of 2%.