South Korea's central bank on Thursday sharply raised its 2021 growth outlook to 4 percent, while holding its benchmark policy rate unchanged at a record low of 0.5 percent, amid a strong rebound in exports.

Buoyed by signs of a robust recovery in exports, the Bank of Korea (BOK) raised its growth outlook to 4 percent for this year, and to 3 percent for next year.

The BOK's February forecast was that South Korea's economy would grow 3 percent this year.

BOK Gov. Lee Ju-yeol said the pace of economic recovery was faster than expected but more patience is necessary on monetary policy.

However, Lee sounded a slightly hawkish tone when asked about the possibility of a rate hike this year, saying that such a hike "depends on the pace of recovery."

Still, Lee stopped short of saying when the BOK would begin normalizing its loose policy, saying that the BOK will prepare for "appropriately" normalizing its accommodative settings.

Thursday's rate freeze decision was unanimous, Lee said, adding that the government's extra budget would boost this year's growth by 0.1 or 0.2 percentage point.

"The recovery of the Korean economy has strengthened. Exports have sustained their buoyancy and facilities investment has continued to recover robustly, while private consumption has gradually emerged from its slump," the BOK said in a statement.

"Going forward, the recovery of the Korean economy is likely to strengthen thanks to the buoyancy of exports and investment as well as the improvement in private consumption," it said.

The BOK also raised its inflation outlook for this year to 1.8 percent, compared with its previous forecast of 1.3 percent.

As widely expected, the BOK's monetary policy board members voted to leave the base rate steady in this year's fourth rate-setting meeting.

Low inflationary pressure and rising home prices also appeared to prod the BOK board to stand pat, analysts said.

Many analysts have predicted that the BOK may not raise its key rate throughout this year as a wave of coronavirus infections at home show little signs of slowing down.

To bolster the pandemic-hit economy, the BOK slashed the key rate to the all-time low of 0.5 percent in May last year by delivering an emergency rate cut of half a percentage point.

Despite signs of a robust recovery in exports, weaker consumption has weighed on employment and increased pressure on policymakers.

So far this year, South Korea's economic recovery has shown signs of gaining pace, helped by a strong rebound in exports.

Exports, which account for about half of the nation's gross domestic production, jumped 41.1 percent in April from a year earlier, extending their gains for a sixth month, as demand for chips and automobiles stayed strong amid the improving global economy.

Outbound shipments came to $51.1 billion last month, compared with $36.2 billion a year earlier, according to government data.

In the first 20 days of May, exports soared 53.3 percent on-year on the back of robust demand for chips and automobiles. (Yonhap)