South Korea’s economy grew at its fastest pace in two years in the first quarter of this year as exports bounced back despite competition from a weak yen, the Bank of Korea said yesterday.
Asia’s fourth-largest economy expanded a seasonally adjusted 0.9 percent quarter-on-quarter in the period from January through last month, compared with a rate of 0.3 percent in the previous quarter.
It was the strongest expansion since the period from January through March 2011, when the economy grew 1.3 percent, and will likely dent expectations of a central bank interest rate cut later this year.
The central bank delivered two rate cuts last year — in July and October last year — which brought the base rate to 2.75 percent.
It has since kept the policy rate unchanged.
Hit by sluggish export demand from Europe and the US, the South Korean economy expanded just 2 percent last year, its slowest pace for three years.
Earlier this month, the central bank revised its growth forecast for this year down to 2.6 percent, just three months after slashing it from 3.2 percent to 2.8 percent.
However, yesterday’s data showed exports rising 3.2 percent from the fourth quarter of last year, when they suffered a 1.1 percent decline.
Last week, the government proposed a 17.3 trillion won (US$15.4 billion) supplementary budget to help boost the economy, including further spending on defense at a time of heightened tensions with North Korea.
The first fiscal stimulus package for four years, which requires parliamentary approval, will cover a 12-trillion won shortfall in revenue and provide 5.3 trillion won in new spending.
“We prepared the extra budget proposal ... given worries that our economic engine could cool off if we do not take immediate action,” South Korean Finance Minister Hyun Oh-seok told policymakers in Seoul yesterday.