BOK cuts inflation forecast for 2015 to 1.9%

By Park Sae-jin Posted : January 16, 2015, 17:26 Updated : January 16, 2015, 17:26

 

South Korea's central bank has cut its inflation forecast for 2015 to 1.9 percent from 2.4 percent.

The rate of increase in the consumer price index (CPI) is forecast to reach an annual average of 1.9 percent this year, the Bank of Korea (BOK) said in its "Economic Outlook for 2015" report Thursday. 

Despite the hike in cigarette prices, the CPI growth forecast for 2015 was adjusted downward, compared to October’s estimate of 2.4 percent, due mainly to the sharp fall in international oil prices, the BOK said in a press release.

Following are excerpts from the annual report. 

-Economic growth 
The Korean economy is expected to post a year-on-year rate of growth at around the mid-3 percent range in 2015.

The economic growth rate is projected to increase gradually, owing for example to the global economic recovery driven largely by the United States and the declines in international oil prices.

The rate of growth of gross domestic income (GDI) (3.9 percent) will exceed that of gross domestic product (GDP) (3.4 percent) in 2015, as in 2014, due to improvements in the terms of trade as a result of unit import price stability stemming, for example, from the declines in international oil prices.

The GDP growth rate in 2015 is projected to be 3.0 percent in the first half and 3.7 percent in the second half.

Private consumption is expected to exhibit modest growth, in accord with an increase in real purchasing power boosted by the declines in oil prices and a rise in the number of people employed. However, lackluster consumer sentiment and the accumulation of household debt may work as factors limiting consumption.

Facilities investment is expected to maintain its upward trend, bolstered largely by the improvement of the global economy and the government measures to boost investment. The delay in the recovery of investor sentiment and the spare manufacturing capacity may, however, work to limit the trend of facilities investment increase.

Growth in intellectual property products investment is expected to accelerate, led chiefly by increased government support and expansions in R&D investment in the public and private sectors. Construction investment is also forecast to grow, centering around residential building construction and civil engineering projects.

Exports are projected to show modest growth, as the export environment improves with the accelerating pace of world trade growth and as corporations’ export outlooks improve.

-Current account surplus 
The ratio of the current account surplus to GDP is projected to rise from 6.3-6.4 percent in 2014 to 6.7-6.8 percent in 2015, and then fall to 5.7-5.8 percent in 2016.

The current account surplus for 2015 is projected to come in at US$94 billion, higher by $24 billion than the October forecast.

For 2016, the surplus is forecast to be around $85 billion.

-Employment
The unemployment rate is projected at around 3.4 percent, and the employment rate at approximately 60.7 percent (66.1 percent on an OECD basis). OECD stands for the Organization for Economic Cooperation and Development. 
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