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S Korean economy grows faster than reported

UPSWING: The country’s economic expansion in the three months to June was its fastest since 2003 and private consumption was up 3.6 percent from the first quarter

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A man walks past an advertisement promoting a bank in Seoul, South Korea, yesterday, after news emerged that the country’s economy grew faster than expected in the second quarter.

PHOTO: REUTERS

The South Korean economy expanded in the second quarter at a faster pace than initially estimated, driven by consumer spending and business and construction investment.

GDP grew 2.6 percent from the previous three months, compared with the July 24 estimate of 2.3 percent, the Bank of Korea said in Seoul yesterday. The economy shrank 2.2 percent from a year earlier, compared with the previously published 2.5 percent decline.

“The revision shows private demand is actually picking up and growth is not just driven by government support,” said Kwon Young-sun, a Hong Kong-based economist at Nomura Holdings Inc. “I believe the current upswing will continue as there’s room for more factory output amid lean inventory.”

The benchmark KOSPI stock index has gained 43 percent this year and the currency 1 percent against the dollar, the third-best performer among Asia’s 10 most-traded currencies excluding the yen. Exporters including Samsung Electronics Co, Hyundai Motor Co and LG Electronics Inc boosted profits last quarter as South Korea, China and Singapore led a regional rebound.

South Korea’s economic expansion in the three months to June 30 is its fastest since the fourth quarter of 2003.

Private consumption advanced 3.6 percent from the first quarter, compared with a 3.3 percent expansion in the initial GDP report, due to increased spending on goods such as cars.

Corporate investment at factories and for equipment climbed 10.1 percent from the first quarter, compared with the previously published 8.4 percent gain.

The economy has achieved one of the highest growth rates among OECD countries as support from the government and the central bank bore fruit, Jung Yung-taek, head of the Bank of Korea’s national income statistics team, said in Seoul yesterday.

The bank has no immediate plan to revise its yearly gross domestic product estimate, he said. The Bank of Korea forecast in July the economy would contract 1.6 percent this year.

Last month, the bank kept its benchmark interest rate unchanged at a record low 2 percent for a sixth consecutive month.

The government has pledged more than 67 trillion won (US$54 billion) in stimulus, injected money into the financial system and set up a fund to replenish bank capital.

The IMF last month said South Korea’s economy will contract a less-than-estimated 1.8 percent this year. Citigroup Inc said last month that the South Korean economy could contract 1.5 percent this year, less than its previous estimate, as exports would be “more resilient” than expected.

Exports gained 14.7 percent in the second quarter from the previous three months, the same as the expansion reported in July. Construction investment grew 1.7 percent from three months earlier, compared with the 0.4 percent gain initially announced.

Government spending increased 1.1 percent from the first quarter, compared with the 1 percent gain initially announced.

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