BOK pledges to support economic growth

South Korea's central bank plans to focus its 2013 monetary policy on supporting the economic recovery and promoting financial stability by closely watching economic conditions at home and abroad, its chief said Monday. "The global economy and the Korean economy are not likely to markedly improve in 2013. But at the same time, pessimistic economic views are not likely to prevail," Bank of Korea (BOK) Governor Kim Choong-soo said in his New Year's message. "The BOK plans to focus its monetary policy for 2013 on promoting financial stability, supporting the economic recovery and helping the underprivileged while firmly maintaining price stability." His remarks are in line with the BOK's 2013 monetary policy report that was unveiled last week. The central bank said it will make efforts to prevent low growth from continuing to erode the country's growth potential. His remarks came as the Korean economy is likely to grow some 3 percent next year, running below its long-term potential growth rate of around 3.8 percent. The central bank said that inflation is likely to grow 2.7 percent next year, picking up from this year's estimate of a 2.3 percent rise. The BOK cut the key rate in July and October to 2.75 percent in a bid to help foster growth, according to South Korea's (Yonhap) News Agency. The governor also stressed the need to take into account targeting nominal gross domestic product (GDP) as its monetary policy target, instead of the current inflation targeting. Ensuring price stability is the main policy mandate for the BOK though the role of promoting financial stability was given to the central bank late last year. But some experts raise the validity of inflation targeting as the central bank cannot help raising the interest rate when prices are skyrocketing, driven by supply shocks, even in the face of the slowing economy.