Seoul: The chief of South Korea's central bank stated that the domestic economy is anticipated to grow significantly this year, buoyed by a semiconductor upcycle. However, challenges remain due to the United States' tariff scheme and other risk factors.
According to Yonhap News Agency, Bank of Korea (BOK) Governor Rhee Chang-yong shared this outlook during a policy briefing at the National Assembly. Rhee highlighted that despite uncertainties related to U.S. tariff policies, domestic demand has shown recovery supported by solid consumer sentiment, and exports have continued to rise due to the semiconductor upcycle. As a result, this year's economic growth is expected to surpass last year's figures significantly.
The BOK's latest forecast, released in November, projected a 1.8 percent economic expansion in 2026, following a 1 percent growth last year. An updated forecast is expected to be released by the central bank on Thursday.
Rhee identified the volatility in the won-dollar exchange rate and the stock market as primary risk factors. He noted that measures taken to stabilize the foreign exchange supply and demand toward the end of last year helped mitigate the local currency's depreciation pace, but significant volatility persists due to fluctuations in the U.S. dollar and Japanese yen.
Rising stock prices, driven by favorable conditions in semiconductor and other key industries, have experienced increased volatility recently amid concerns over excessive AI-related investments and potential disruptions to existing industries. Rhee also expressed concerns over credit risks among self-employed individuals and other vulnerable groups, as well as financial imbalances caused by rising housing prices in the Seoul metropolitan area.
Addressing inflation, Rhee stated that consumer prices are expected to remain stable near the 2 percent target level. However, global oil prices and foreign exchange market volatility pose potential risks.
Rhee emphasized that given the high uncertainties both domestically and internationally, monetary policy decisions will be made by thoroughly assessing economic activity, inflation, and financial stability conditions. The BOK's Monetary Policy Board is set to hold a rate-setting meeting on Thursday, where it is anticipated to maintain the benchmark rate at 2.5 percent for the sixth consecutive meeting amid ongoing uncertainties.