(2nd LD) BOK upbeat over economy, but says uncertainty still persists

(ATTN: RECASTS headline, lead; UPDATES with remarks by BOK Gov. in paras 2,5;
REWRITES throughout)
By Kim Soo-yeon
SEOUL, Aug. 11 (Yonhap) -- South Korea's top central banker on Tuesday cast a
more upbeat view, but said uncertainty still lingers over Asia's fourth-largest
economy hinting that its easing policy stance may continue for the time being.
"Second-quarter growth was better-than-expected. In the second half, the economy
is likely to post positive on-quarter growth as the private sector is
recovering," Bank of Korea (BOK) Gov. Lee Seong-tae told a press conference.
"As major advanced economies have yet to make a full-blown recovery,
uncertainties still persist," Lee added, noting that the BOK will maintain its
credit easing policy for the time being.
His remarks came after the BOK froze its key interest rate at a record low of 2
percent for the sixth straight month, as widely expected. The central bank
lowered the benchmark seven-day repo rate by a total of 3.25 percentage points
between October and February in a bid to bolster the slumping economy.
The Korean economy grew 2.3 percent in the second quarter from three months
earlier, the fastest pace in over five years, on the back of economic stimulus
packages. Experts say that as the effects of strong fiscal spending could wane
down the road, the local economy may not be able to sustain the rapid pace of
recovery in the second half.
The government and the BOK's aggressive easing stance helped pull the economy out
of its worst downturn in more than decade. But as the economy is now showing
signs of improvement, debate about the timing of tightening measures by the BOK
has grown.
A batch of economic data are underpinning rising optimism that the economy is
bottoming out, although the economic outlook is still murky, leading policymakers
to strike a cautious note about the pace of the economic recovery.
South Korea's industrial output rose 5.7 percent in June from a month earlier,
marking the sixth straight monthly expansion. The country logged a trade surplus
of US$5.14 billion in July, lending firm support to the Korean currency, which
has gained about 28 percent against the U.S. dollar since early March.
Economists say the BOK's possible rate hike could hinge on how strongly the
Korean economy grows in the third quarter. They say that before doing so, the
central bank is likely to gradually soak up ample liquidity by reversing
unconventional measures that it adopted in the midst of the global financial
turmoil.
The government has reiterated that it will stick to its "expansionary" economic
policy, as it is premature to say that the economy is making a full-blown
recovery.
South Korea's consumer prices rose 1.6 percent in July from a year earlier, the
slowest pace in more than nine years, easing concerns that inflation may hamper
an economic recovery and spark asset bubbles.
Lee said inflation is likely to grow in the 2-percent range this year, but would
not surpass 3 percent.
sooyeon@yna.co.kr
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