August 28, 2017 / 1:01 AM / a year ago

S.Korea economy set to sustain momentum, although uncertainty

SEOUL, Aug 28 (Reuters) - South Korea’s economy is likely to be able sustain annual growth of close to 3 percent on a continuing basis, the central bank said on Monday, although there is a high level of uncertainty in the outlook.

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 on Monday.

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 percent 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 U.S. escalated over Pyongyang’s test-firing of missiles in defiance of U.N. Security Council resolutions.

Foreign investors sold a net 1.5 trillion won ($1.34 billion) worth of South Korean stocks and reduced their holdings of the country’s domestic bonds by another 1.5 trillion 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 400 billion won. Offshore investors increased their bond holdings by a net 2.8 trillion won in July, it said.

South Korea’s economy, Asia’s fourth-largest, grew an estimated 2.7 percent in the second quarter on an annual basis after a 2.9 percent gain in the preceding quarter. The central bank forecasts a 2.8 percent rise for the whole of this year. ($1 = 1,121.0600 won) (Reporting by Choonsik Yoo; Editing by Eric Meijer)

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