Korea records 0.9% growth in 4th quarter

By Korea Herald
  • Published : Jan 23, 2014 - 20:15
  • Updated : Jan 23, 2014 - 20:15
South Korea’s economic growth matched analysts’ estimates in the fourth quarter, as the central bank kept the benchmark interest rate at the lowest level since 2010.

Gross domestic product gained 0.9 percent from the previous quarter, when the increase was 1.1 percent, the Bank of Korea said today in a statement in Seoul. That matched the median 0.9 percent estimate of 12 economists surveyed by Bloomberg News. From a year earlier, growth was 3.9 percent.

The Bank of Korea is projecting 3.8 percent growth this year, the fastest pace since 2010, when Asia’s fourth-largest economy was rebounding from the global financial crisis. At the same time, the government is monitoring the risks posed by weakness in the yen, which aids rival exporters in Japan, and the winding back of U.S. stimulus measures.

“Growth momentum is pretty solid,” Lee Chul Hee, a Seoul-based economist at Tong Yang Securities Inc., said before the data was released. “South Korea will benefit considerably from a better global economic outlook. The Bank of Korea can provide enough support for the economy by keeping rates on hold this year.”

Domestic demand

The KOSPI was down 0.3 percent at 9:52 a.m. in Seoul, and the won fell 0.4 percent against the dollar to 1,071.38 following the release of the data.

While the October-December expansion was the slowest in three quarters, it was faster than the economy registered in any quarter in 2012.

Exports contributed more to growth than domestic demand, but the gap narrowed, said Jung Yung Taek, director general at the BOK’s Economic Statistics Department.

Buoyed by rising exports, the private sector led the fourth-quarter expansion. Consumer spending and investment in facilities also increased, while government spending stalled due to a drop in tax revenue, Jung told reporters in Seoul.

Gov. Kim Choong Soo, set to retire on March 31, held the benchmark rate at 2.5 percent on Jan. 9 after a surprise cut in May.

The International Monetary Fund this week raised its forecast for global growth this year to 3.7 percent as expansions in the U.S. and U.K. accelerate, and urged advanced economies to maintain monetary accommodation to strengthen the recovery.

South Korean exporters need to penetrate into new markets amid concerns a weaker yen may hurt their competitiveness, Finance Minister Hyun Oh Seok said in a meeting in Seoul today.

South Korea’s recovery is bolstering employment while the property market is faring better than it did last year, Hyun said on Jan. 15. The government will seek to balance between exports and domestic demand for sustainable growth, Hyun said. (Bloomberg)