Bank of Korea chief places price stabilization over growth

Bank of Korea Gov. Kim Choong-soo said Wednesday that top priority should go to price stabilization instead of economic growth.

At a seminar hosted by the Korea Institute of Finance, he said, “The central bank is more concerned about inflationary pressure than economic growth. Korea is facing a significantly difficult situation in taming inflation.”

“Upward pressure on the supply side stemming from rising international prices of raw materials will mount, while demand-side pressure is increasing due to the widening GDP gap, or the difference between actual and potential GDP.”

On the outlook for the U.S. economy, he said better-than-expected U.S. growth could cause the central bank to revise upward Korea’s GDP growth and consumer inflation for this year.

“The Bank of Korea forecasts the U.S. economy to grow 2.4 percent this year, while the International Monetary Fund and the Organization of Economic Cooperation and Development project 2.3 percent and 2.2 percent, respectively. But prospects that the U.S. economy could grow more than 3.5 percent have appeared,” he said, adding, “This could lead to a potential upgrade in our (growth) forecast.”

“External conditions might change fast. We’ll have to see how the situation develops.”

The Bank of Korea has forecast growth of 4.5 percent and inflation of 3.5 percent this year in Korea.

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