South Korea is a sovereign state in the southern part of the Korean Peninsula. It is neighboured by China to the west, Japan to the east, and North Korea to the north. With an estimated population of 50 million, it covers a total area 98,480 square kilometres which includes partially forested mountain ranges separated by deep, narrow valleys. Its main exports are wireless telecommunications equipment, motor vehicles and computers. Korea was one nation under the Goryeo and Joseon dynasties until the end of the Korean Empire in 1910, when Japan began a 35-year period of colonial rule. Japan surrendered to the Allied Powers in 1945 and three years later the country split in two, beginning decades of conflict between North and South. The current president of The Republic of Korea (South Korea) is Park Geun-hye. She is the first woman to be elected as President in South Korea.
South Korea keeps rate, seen on hold this year
The Bank of Korea held interest rates steady on Thursday, possibly matching the analysts’ consensus view that the cut in May was the last one for the year because South Korea is on a track to recovery.
The Bank of Korea’s monetary policy committee left its base rate unchanged at 2.50 per cent, a media official said without elaborating.
Seoul markets were little changed from earlier levels as the decision was widely expected.
The 22 analysts surveyed by Reuters before the meeting were unanimous in forecasting the central bank would hold its policy steady after having cut the rate in May for the first time in seven months in a surprise move.
“After the rate cut in May, I don’t see any additional cuts as further economy slowdown doesn’t seem likely in the second or third quarter,” said Jung Sung-wook, a fixed-income analyst at KTB Securities in Seoul.
Asia’s fourth-largest economy is picking up some momentum and the increased volatility in global financial markets means the country, highly vulnerable to cross-border capital flows, had better not make any significant policy change.
Quarterly economic growth sped up to 0.8 per cent in the January-March period from 0.3 per cent in the prior quarter while inflation in May hit a near 14-year low of 1.0 per cent, below the central bank’s 2.5 per cent-3.5 per cent target.
The Ministry of Strategy and Finance is widely expected to upgrade its economic growth forecast for this year from the existing 2.3 per cent estimate when it releases revised economic projections by the end of this month.
The government of President Park Geun-hye had cut this year’s economic growth forecast soon after she took office in late February and later introduced various stimulus measures including a new US$5 billion fiscal spending plan.
South Korea’s economy grew 2.0 per cent last year, the second-worst since the late 1990s Asia financial crisis, but both the finance ministry and the central bank see growth picking up close to 3 per cent this year thanks to stimulus measures.
A central bank research early last month put the optimum pace of growth for South Korea’s economy at between 3.3 per cent and 3.8 per cent, compared with an average of 4.3 per cent seen for the five years before the 2008 global financial crisis.