Solid global growth and a fiscal stimulus package introduced in late July will support the economy, while tensions over North Korea and a possible worsening in trade relations with China and the United States creates uncertainty, the Bank of Korea said in a report to parliament yesterday.
The BoK issued the report on embargo before the parliament’s strategy and finance committee meeting, at which governor Lee Ju-yeol will take questions from lawmakers.
The report did not contain any indication of the central bank’s future monetary policy.
The BoK has held its policy interest rate at a record-low 1.25% since cutting it in June last year.
It said local financial markets were stabilising after turbulence early this month as tensions between North Korea and the US escalated over Pyongyang’s test-firing of missiles in defiance of UN Security Council resolutions.
Foreign investors sold a net 1.5tn won ($1.34bn) worth of South Korean stocks and reduced their holdings of the country’s domestic bonds by another 1.5tn won during the first 22 days of this month, the report noted.
Foreigners were also net sellers of stocks in July, but the value of net sales was a low 400bn won.
Offshore investors increased their bond holdings by a net 2.8tn won in July, it said.
South Korea’s economy, Asia’s fourth-largest, grew an estimated 2.7% in the second quarter on an annual basis after a 2.9% gain in the preceding quarter.