South Korea’s central bank on Wednesday maintained its 2011 growth forecast for the local economy, but revised up its inflation projection to a three-year high of 3.9 percent, citing high oil and food prices.
The Bank of Korea (BOK) maintained its growth projection, made in December, of a 4.5 percent expansion. South Korea’s economy, Asia’s fourth-largest, grew 6.2 percent in 2010 after advancing 0.3 percent in 2009.
But the central bank upgraded its inflation projection for this year, up from a previous estimate of 3.5 percent, indicating that the country will face a buildup in inflationary pressure.
The revised 2011 inflation reading marked the highest level since a 4.7 percent gain tallied in 2008.
“The inflation outlook was revised up mainly due to supply-side pressures like high oil prices and the outbreak of foot-and-mouth disease,” the BOK said in a statement.
The BOK said the recovery in the U.S. economy and an expansion in global trade are expected to offset negative impacts of higher oil prices, leading the central bank to keep its earlier growth forecast.
The Korean economy is estimated to have grown 1.5 percent on-quarter in the first quarter and the quarterly growth rate is expected to reach around 1 percent in the second quarter.