South Korea's stronger-than-expected economic growth in the second quarter, following a similarly robust first quarter, has bolstered expectations that the Bank of Korea will raise its benchmark interest rate for a second consecutive time at the August Monetary Policy Board meeting.
Kim Jin-wook, an economist at Citibank Korea, said Thursday in a report that he expects the Monetary Policy Board to raise the benchmark interest rate by 25 basis points at its Aug. 27 meeting, citing solid GDP and GDI figures.
Kim had earlier forecast that the Bank of Korea would raise the benchmark interest rate by 25 basis points each in August, November and February next year, bringing the terminal rate to 3.5 percent per year.
The Bank of Korea announced Thursday that real GDP growth in the second quarter came in at 0.6 percent, exceeding the 0.2 percent forecast it had offered in May.
Real GDI growth in the second quarter also rose 15.6 percent year-on-year, the highest rate since the first quarter of 1988, driven by improved terms of trade as export prices for semiconductors and other goods climbed.
Kim forecast that the improvement in terms of trade would also significantly lift nominal GDP growth.
He raised his nominal GDP growth forecast for this year to 20.7 percent from 15.5 percent, which would be the highest level since 1991.
He kept his real GDP growth forecasts for this year and next year unchanged at 3.7 percent and 3 percent, respectively.
He also trimmed his July consumer price index inflation forecast to 2.7 percent from 2.9 percent, reflecting a drop in oil prices.
kimstar@heraldcorp.com
