South Korea recorded 0.1 percent growth in the first quarter, narrowly avoiding recession, after its exports slump slowed amid unprecedented rate cuts and stimulus spending, the central bank said yesterday.
The result, which follows a 5.1 percent contraction in the December quarter, means Asia’s fourth largest economy escaped its first recession — defined as two successive quarters of negative growth — since 1998.
However, the export-dependent economy still shrank 4.3 percent year-on-year after contracting 3.4 percent in the final quarter of last year.
“Private spending and construction investment swung to gains and a decline in exports slowed down in the first quarter,” the Bank of Korea said in a statement.
Exports fell 3.4 percent quarter-on-quarter in the three months ended March 31, after declining 12.6 percent in the December quarter.
But private spending grew 0.4 percent quarter-on-quarter compared with a 4.6 percent contraction in the previous period.
The government last month unveiled a 28.9 trillion won (US$21.3 billion) extra budget to stimulate the economy, complementing extra spending announced earlier.
The central bank has cut its base rate by 325 basis points since October to 2 percent, a record low.
“The [South] Korean economy is still on a downturn trend although a sharp decline in economic activity eased considerably in the first quarter,” Choi Chun-sin, head of the central bank’s economic statistics division, told reporters.
“We need to see at least 1 percent on-quarter growth before we can say the economy has hit bottom,” he said.
The central bank predicts the economy will shrink 2.4 percent this year with growth of 3.5 percent next year.