The Bank of Korea retained its interest rate at a record low and lifted its growth outlook as exports are set to improve gradually with global recovery, and investment maintains its growth.

The Monetary Policy Board of the Bank of Korea, on Thursday, decided to hold its key policy rate at 0.50 percent, as widely expected.

“As the recovery in the Korean economy is expected to be modest and inflationary pressures on the demand side are forecast to remain weak, the Board will maintain its accommodative monetary policy stance,” the bank said in a statement.

The bank projected the economy to contract 1.1 percent this year instead of 1.3 percent decline estimated previously. The outlook for next year was revised up to 3 percent from 2.8 percent.

Gross domestic product is expected to grow 2.5 percent in 2022. The bank cautioned that the uncertainties surrounding the economic outlook remain elevated.

The bank observed that private consumption is likely to recover only slowly due to delayed improvement of household income and health concerns amid Covid-19 pandemic.

Facilities investment is forecast to rebound this year thanks to the IT sector, the bank added. The non-IT sector is also projected to expand investment.

Further, exports of goods are expected to shift to an increase as the global economy improves gradually.

The net contribution of domestic demand to GDP growth is forecast to rebound in the next year after a sharp contraction this year.

Consumer price inflation is forecast to rise to 1.0 percent and 1.5 percent in the next two years from 0.5 percent this year. Consumer price inflation is expected to rise gradually as oil prices rise at a moderate pace and economic conditions improve.

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