South Korea’s economy grew at its fastest pace in two years in the April-to-June period on government stimulus and a rise in consumer spending, the central bank said yesterday.
GDP expanded 2.3 percent in the second quarter from a year earlier, accelerating from the first-quarter’s 1.5 percent gain, the Bank of Korea said.
GDP rose a seasonally adjusted 1.1 percent in the second quarter from the previous quarter when the economy grew 0.8 percent quater on quarter.
It is the strongest pace since the first quarter of 2011, when the economy grew 1.3 percent quarter on quarter.
“Facilities investment declined, but private consumption swung to growth. Government spending also increased,” the bank said in a statement.
Market expectations were for the fourth largest economy in Asia to grow 0.9 percent on quarter, Dow Jones Newswires said.
The stronger-than-expected growth bolsters hopes of a sustained recovery despite challenges from slowing global demand and the weaker Japanese yen eroding South Korea’s export competitiveness.
The central bank expects the economy to expand 2.8 percent this year and 4 percent next year. However, analysts say South Korea faces downside risks of a slowing Chinese economy and the unwinding of US stimulus, forcing the central bank to keep its policy rate steady to underpin growth.
Exports rose 1.5 percent on-quarter in the second quarter, slowing from a 3 percent gain in the first quarter, but private spending, one of the country’s main growth engines, rose 0.6 percent after falling 0.4 percent in the preceding quarter.
South Korea’s export-reliant economy has been badly affected by shrinking global demand. Overseas shipments fell 1.3 percent last year, the first decline in three years, as growth weakened in China, the country’s largest buyer, and as the European debt crisis undercut the global economy.
More recently, the weakening yen also has hurt South Korea’s exports by making Japanese products cheaper relative to Korean ones in global markets.
Early this year, the government put forth a 17.3 trillion won (US$15.5 billion) extra budget, its first fiscal stimulus in four years, to boost an economy that had grown less than 1 percent on a quarter-to-quarter basis for nearly two years.