South Korea GDP growth hits two-year high
Concerns over exports and retail sales dampen outlook for rest of year
Burdened with high debt and facing uncertain prospects, South Korean consumers are tightening their purse strings, dampening hopes that they will lift the economy as exports - the country’s traditional growth driver - splutter. Photograph: Kim Hong-Ji/Reuters
South Korea’s economy expanded in the first quarter at its fastest pace in two years, but the central bank report failed to brighten the prospects for the rest of the year as both consumers and exporters struggle for confidence.
The data showed today that the economy grew a seasonally adjusted 0.9 per cent from a weak fourth quarter of 2012. But compared with a year earlier, it grew just 1.5 per cent, a pace unchanged from the fourth quarter, which was a three-year low.
The consumer downturn and concern over exports -- the twin engines of the Korean economy -- prompted the new government of President Park Geun-hye to produce a $15.5 billion (€11.9 billion) extra budget and stimulus package earlier this month.
The package aims to revive an economy that more typically grew at rates of 4 per cent or higher before the global financial crisis. A slump in the yen has added to Korean exporters’ caution as they fear losing out to their Japanese rivals.
Corporate investment in plant and other production equipment rose 3 per cent, the most in a year, but it was still more than 11 per cent lower than year-earlier levels, its sharpest decline in nearly four years on that basis.
Exports appeared more promising, rising 3.2 per cent from the fourth quarter and 3.6 per cent from a year earlier, the volume-based GDP figures showed. But customs figures, which measure the value of exports, paint a less rosy picture, showing they increased just 0.5 per cent from a year earlier.
The latest customs figures show the trend worsened in the first 20 days of April, when exports dropped 3 per cent from a year earlier as data from the United States, China and Europe raise fresh concerns about prospects for the global economy.
The GDP figures showed private consumption fell for the first time in five quarters as Koreans keep a tight hold on their wallets to deal with heavy household debt in the face of a slide in property prices and sluggish exports.
Markets showed a muted reaction to the data.