On Monday, South Korea’s central bank raised its 2010 growth forecast to 5.2%, up from 4.6% last December. This is in line with “brisk exports and improving domestic demand,” said Lee Sang-Woo, director-general of the central bank’s research department. The forecast is even more bullish than that released by the finance ministry and would be the fastest growth in Korea since 2006, when it grew 5.2%.
Broken down, the bank forecasts:
- 11.9% growth in exports, up from a previous forecast of 9.3%
- 4% growth in private spending, up from a previous forecast of 3.6%
- 13.4% growth in capital investment, up from a previous forecast of 11.4%
- 2.6% inflation, down from a previous forecast of 2.8%
Although South Korea is on a strong economic recovery track, the tenacity of the recovery will be tested as the government’s financial spending wanes. It will be key to see whether the private sector can bear the burden of growth in the coming months. Investors should also keep an eye on the yuan situation and how it affects South Korea’s trade.
For more stories on South Korea, visit our South Korea category.
- iShares MSCI South Korea Index (NYSEArca: EWY)
Sumin Kim contributed to this article.