South Korea's central bank on Thursday raised its economic growth forecast for this year to 2.8 percent from its earlier estimate of 2.6 percent as the local economy is improving, aided by fiscal and monetary stimulus. 

The forecast by the Bank of Korea (BOK) is higher than the government's revised growth forecast of 2.7 percent for this year. The central bank's 2014 growth projection was revised up to 4 percent from the 3.8 percent estimate made in April.

The BOK's outlook revision comes as its monetary policy committee earlier in the day froze its key interest rate at 2.5 percent for the second straight month.

"The Korean economy is expected to sustain its trend of recovery by growing around 1 percent every quarter until next year," the BOK said in a statement.

South Korea has been making efforts to prop up the slowing growth by implementing additional fiscal spending. The BOK made the first rate cut in seven months in May to support the government's stimulus drive.

The BOK lowered its 2013 consumer inflation forecast to 1.7 percent from an earlier projection of 2.3 percent amid falling oil prices. But the 2014 inflation outlook was raised to 2.9 percent from 2.8 percent.

Exports, which account for about 50 percent of the South Korean economy, are likely to grow 5.1 percent this year before gaining 8percent next year.

Private spending will likely advance 2.1 percent in 2013 and grow 3.5 percent next year, the BOK said.

Facility investment is expected to gain 1.8 percent this year, but will pick up to 7 percent in 2014. Construction investment will likely grow 4.5 percent this year before advancing 2 percent next year, the bank added.

The central bank sharply raised its 2013 forecast for the current account surplus to US$53 billion from its earlier estimate of $33 billion. In 2014, the surplus is likely to reach $38 billion, it added. (Yonhap News)