Bank of Korea Expects 2027 Budget to Have Marginal Impact on Inflation

Dow Jones17:39

Bank of Korea Gov. Shin Hyun-song expects the government's planned budget increase next year to have only a marginal impact on inflation.

Speaking at a parliamentary audit of the central bank Monday, Shin said the proposed 2027 national budget would add just 0.06 percentage point to headline inflation.

The BOK chief downplayed concerns that increased government spending next year could clash with tight monetary policy, saying the additional inflationary impact would be limited.

He also said the proposed budget could boost gross domestic product growth by 0.5 percentage point in 2027.

The proposal, submitted in September and awaiting parliamentary approval, calls for a record 12.8% increase in government spending to 820.9 trillion won, equivalent to $612.41 billion.

Before the budget proposal was released, the central bank forecast in August that South Korea's GDP would grow 2.9% in 2027, with inflation averaging 2.3%.

The BOK raised interest rates for the second straight meeting in August, expecting inflation to remain above its 2% annual target for an extended period.

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