S. Korea’s economy to show modest recovery: BOK

SEOUL, March 11 (Yonhap) — South Korea’s economy is expected to stage a modest recovery from the coronavirus pandemic and the Bank of Korea (BOK) will continue monetary easing to prop up an economic recovery, the BOK said Thursday.

In a regular monetary report, the BOK said it will pay close attention to household debts and financial imbalances as companies and households take advantage of cheap credit.

“As the pace of the local economic recovery is expected to be modest, (the BOK) will keep monetary easing,” the BOK said in a statement.

Inflationary pressure remained weak as the pandemic weighs on consumer prices, but consumer prices are likely to rise above 1 percent as the economy recovers at a modest pace, it said.

The BOK also took a cautious tone on progress in the global coronavirus vaccine campaign, saying it will take more time to speed up the distribution of vaccines worldwide.

To boost the pandemic-hit economy, the BOK cut the key rate to the all-time low in May last year after delivering an emergency rate cut of half a percentage point in March last year.

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 rose 9.5 percent in February from a year earlier to extend their gains for the fourth consecutive month on robust shipments of chips.

Exports came to US$44.8 billion last month, compared with $40.9 billion a year earlier, according to the data compiled by the Ministry of Trade, Industry and Energy.

Still, weaker labor markets have delayed an economic recovery. The number of employed people reached 25.8 million in February, 982,000 fewer than a year earlier.

It marked the sharpest on-year fall since December 1998, when the country lost 1.28 million jobs in the wake of the Asian financial crisis.

Last month, the BOK kept the nation’s 2021 growth outlook at 3 percent in its latest update. The nation’s economy is expected to grow 2.5 percent in 2022, the BOK said.