Amid growing global uncertainty and low yen, the September projection of Korea’s economic growth at 3.7% unchanged

Midst of the dimming global outlook for growth and weakening yen, the plunging international oil prices is expected to offset the economic impact from downside risks

For 2015, consumer price declines to 1.7% from the September estimate of 2.3%

Factors such as decline in international oil prices, slump in demand recovery, and the limited rise of USD/KRW keep the upward pressure low. One of key ascending factors that send consumer prices upward is a price hike on tobacco products. It is estimated that a price increase of 2,000 won raises the inflation rate by 0.56%p. If tobacco price hike were excluded, the inflation rate is estimated to decline at 1.1%, lower than that of 2014

Current account surplus maintains a 2014-level at US$86.6 billion; USD/KRW at 1,071 won for 2015

Despite an expectation for a widening deficit in the service account balance, current account surplus for 2015 is forecast to maintain at US$86.6 billion, a marginal decline from US$87.6 billion in 2014, boosted by a decline in imports following falling oil prices and impact from growing goods balance surplus. USD/KRW is expected to show a gradual depreciation at a yearly average of 1,071 won, as the ascending pressure following the US benchmark rate rise is mitigated by a large current account surplus.

Efforts needed to minimize impacts from foreign exchange volatility on plunging oil prices

In the times when commodity prices fall, foreign exchange volatility tends to intensify in emerging markets, including Korea. In particular, weakening cooperation on monetary policy among major economies in recent times increases risks for emerging market volatility. Therefore, an orderly, planned and proactive response to counter confounding factors in the foreign exchange market is called for. In addition, efforts are needed to restore market confidence through macro-prudential measures and minimize foreign exchange volatility by strengthening Korea’s global financial diplomacy.

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