The International Monetary Fund (IMF) on Thursday estimated South Korean economy to grow by 3.6 percent this year in its second outlook upgrade in two months after reflecting enhanced fiscal stimuli and faster-than-expected global economic recovery.

“The outlook is for a recovery in 2021 with real GDP projected to grow 3.6 percent, supported by a gradual normalization of Covid-related factors and stronger external demand,” it said in a report after an annual consultation with the Korean government. The IMF adjusted up its estimate for Korea to 3.1 percent in January from 2.9 percent in October.

The spike in latest estimate “incorporates the impact of the recently proposed supplementary budget.”

South Korean legislative passed this year’s first budgetary increase of 15 trillion won ($13 billion) to finance fourth round of Covid-19 relief funds in 20 trillion won scale.

Korean exports led by electronic components and automobiles have been keeping up about 10-percent growth thanks to fast turnaround in the United States and China.

The buoyant outlook mildly boosted sentiment in financial market, with the Kospi 0.6 percent up at 3,027.89 and the Korean currency up 1.7 won at 1,132.80 versus the U.S. dollar by midday.

The Bank of Korea Governor Lee Ju-yeol earlier this week projected the growth to turn out better than estimated 3.0 percent. The government has set 3.2 percent growth target for this year.

The Ministry of Economy and Finance welcomed the IMF’s new forecast for the country’s growth for this year, saying that Korea has “successfully differentiated from others based on comprehensive policy measures and sound fundamental” after Covid-19 vaccination.

“Economic activities have been picking up since the second quarter of 2020, supported by a rebound in exports, especially of high-tech products, and resilient investment in machinery and equipment,” the IMF noted.

Domestic demand and factors remain weak, the IMF noted.

Employment is also significantly below its pre-Covid level, it worried. A resurgence of coronavirus and slower vaccination rollout are other downside risks that would put the cap on the growth, it added.

The IMF advised authorities to maintain fiscal and monetary policies loose “to help the economy normalize faster, safeguard financial stability, and foster greener and more inclusive growth” for the near term.

By Lee Eun-joo

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