Seoul: Bank of Korea (BOK) Governor Shin Hyun-song stated on Monday that the country's robust economic growth allows the central bank greater flexibility in focusing on inflation control within its monetary policy framework, indicating a more hawkish approach.

According to Yonhap News Agency, Governor Shin emphasized the strength of Korea's economic performance during a dialogue session with Isabel Schnabel, a member of the Executive Board at the European Central Bank, at the BOK International Conference in Seoul. He highlighted that the first-quarter growth was significant, especially when assessed through gross domestic income (GDI) rather than gross domestic product (GDP).

Shin noted that South Korea's real GDP expanded by 3.6 percent year-on-year in the first quarter, while real GDI, which considers shifts in terms of trade, rose by 12.3 percent. He explained that typically, when oil prices increase, GDI tends to grow at a slower pace than GDP due to the adverse impact on South Korea's economy, which heavily relies on crude oil imports. However, the first quarter saw an exception as rising energy prices were counterbalanced by strong semiconductor exports, leading to a faster GDI growth rate.

The BOK chief remarked that strong economic growth reduces the obstacles to adjusting monetary policy amid inflation concerns. He pointed out that it becomes challenging for policymakers to manage trade-offs when weak growth coincides with high inflation. The current robust growth, however, provides more room for effective monetary policy interventions to address inflation.

Last week, the BOK maintained its benchmark interest rate but indicated potential monetary tightening due to ongoing inflation, strong economic growth, and fluctuating foreign exchange markets. Shin mentioned various indicators, such as house prices, household debts, and exchange rates, aligning in the same direction, suggesting the possibility of future policy adjustments.

Shin also anticipated that the strong semiconductor sector performance will be reflected in the nominal GDP figures, predicting substantial growth in nominal GDP. The BOK is scheduled to hold its next monetary policy meeting in July.