Bank of Korea Governor Lee Chang-yong (이창용) said on Sunday that South Korea's economy is likely to grow significantly faster than last year as domestic demand recovers on solid consumer sentiment and exports keep rising on a semiconductor upturn, despite uncertainty over U.S. tariff policy.

Lee made the remarks in opening comments as he attended the National Assembly's Finance and Economy Planning Committee for an afternoon work report.

On inflation, he said consumer inflation would maintain a stable trend near the target level of 2 percent, but assessed that movements in international oil prices and the exchange rate were latent risk factors.

He also cited high volatility in the won-dollar exchange rate and stock prices as risk factors.

Lee said the rise in the exchange rate had narrowed due to measures including year-end steps to stabilise foreign exchange supply and demand, but it was still showing high volatility as it is affected by moves in the dollar and yen. He said stock prices had risen sharply on strong conditions in key industries such as semiconductors, but volatility appeared to be increasing recently due to concerns about excessive investment in artificial intelligence and the replacement of existing industries.

He also said it was necessary to note that, while credit risks persist in vulnerable sectors such as the self-employed, concerns continue over accumulating financial imbalances stemming from rising housing prices in the Seoul metropolitan area.

On the future direction of monetary policy, he said that with domestic and external uncertainty still high, decisions would be made by comprehensively assessing the economy, inflation and financial stability conditions.

[Yonhap News Agency]