Figures released by the central bank Thursday showed the Korean economy grew by 3.9 percent from a year earlier in the first quarter. This figure marked the fastest year-on-year gain since the first quarter of 2011.
Korea’s gross domestic product expanded by 0.9 percent from three months earlier in the January-March period, matching the same growth rate as in the fourth quarter.
Analysts at the Bank of Korea see the pace of quarterly growth as an indication that Asia’s fourth-largest economy is undergoing a robust recovery. The central bank recently raised its growth forecast for this year to 4 percent from 3.8 percent following a 3 percent expansion in 2013.
But consideration of specific factors shows that it may still be too early to paint a rosy picture of the economic outlook. The growth in the first quarter was led mainly by increases in exports and construction investment. The pace of growth in private spending slowed to 0.3 percent in the first quarter from 0.6 percent three months earlier. Facility investment fell by 1.3 percent, compared with a 5.6 percent gain in the fourth quarter of last year.
Boosting consumer spending and corporate investment is needed to sustain the momentum toward full economic recovery. This will also help reduce the impact of external risks on the country’s economy. Attention should be paid to a recent forecast by the International Monetary Fund that Korea’s growth potential will fall to the 2 percent range in a decade without effective efforts to reform the services sector and labor market.
Last week’s ferry disaster, which sorely exposed weaknesses in the country’s economic advancement, seems to be prompting Koreans to reflect on the limits of using rapid GDP growth as a barometer for success. In the deepening mood of mourning across the country, domestic expenditures have declined, particularly squeezing self-employed people and small businesses.
While obsession with rapid growth at all costs may have to be cautioned against, efforts should be made to bring about sustained growth, which is essential for continuing to boost living standards and ultimately making Koreans feel safer and happier.