S. Korea revises up 2011 inflation forecast

15:10, April 13, 2011      

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South Korea's central bank on Wednesday revised up its inflation forecast for 2011 to 3.9 percent.

The Bank of Korea (BOK) upgraded its consumer inflation projection for this year to 3.9 percent from a previous estimate of 3.5 percent, while revising up its core inflation outlook from 3.1 percent to 3.3 percent.

The BOK said headline consumer prices will rise 3.4 percent next year, with core inflation reaching 3.6 percent in 2012.

This year's inflation outlook was revised up mainly due to supply-side pressures such as higher oil prices and the outbreak of foot-and-mouth disease, according to the BOK. In 2012, supply- side pressures will ease sharply, leading to core inflation falling below headline inflation, the bank said.

Meanwhile, the BOK's revised inflation outlook for 2011 was lower than the International Monetary Fund (IMF)'s projection of 4. 5 percent.

"The IMF seems to expect the supply-side pressures to persist throughout the year, but the BOK sees supply factors unlikely contribute much to headline inflation as the government announced various measures to deal with supply shortages," an official at the BOK said by phone.

The BOK maintained its economic growth outlook for this year at 4.5 percent, while forecasting the Asia's fourth-largest economy will grow 4.8 percent next year.

The BOK kept its growth forecast for 2011 which it made in December last year because the economic recovery of the United States. and its consequent expansion of international trade will offset negative impacts from higher oil prices and the outbreak of foot-and-mouth disease, according to the bank.

Current account surplus outlook for this year was revised down to 11 billion U.S. dollars from the previous estimate of 18 billion dollars as higher oil prices will increase import bills, the BOK said.

Source: Xinhua
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