South Korea’s economy grew a faster-than-expected 1.8 percent in the first quarter thanks to a firm export performance and improved domestic demand, the central bank said yesterday.
The quarter-on-quarter rise in GDP was sharply higher than the 0.2 percent increase in the fourth quarter of last year and beat the bank’s prediction earlier this month of 1.6 percent.
Compared with a year earlier, Asia’s fourth-largest economy grew 7.8 percent in the first quarter.
“The [South] Korean economy is on a recovery track. In the first quarter, growth was driven by a balanced contribution from exports, government spending and domestic demand,” said Kim Myung-kee, head of the Bank of Korea’s economic statistics division.
As inventory adjustment wraps up, corporate restocking is expected to support production, Kim said.
Exports rose 3.4 percent quarter-on-quarter in the first quarter after falling 1.5 percent in the fourth quarter. Private spending gained 0.6 percent compared with 0.4 percent.
Capital investment rose 1.5 percent after advancing 5.3 percent in the final quarter of last year, and construction investment rose 0.9 percent after contracting by 0.1 percent three months earlier.
The central bank this month raised its full-year growth forecast to 5.2 percent from 4.6 percent. The finance ministry estimates 5 percent.
The strong recovery has fuelled debate about the right time to raise the key interest rate, which has been frozen at a record low of 2 percent for 14 straight months.
Many analysts say an increase is unlikely in the first half. The new central bank governor, Kim Choong-soo, is seen as close to the government, which opposes any early rise.
He has said the bank could consider an increase only after becoming confident that the private sector is making a sustainable recovery.
South Korean Finance Minister Yoon Jeung-hyun also said growth momentum could slow in the second half, but there was no possibility of a “double dip.”
“Though the pace of economic growth for South Korea is expected to moderate a little in the latter part of this year, following earlier sharp growth, the overall expansion trend will likely continue,” he told Yonhap news agency.
“There is no possibility that the economy will fall into a double dip because the economic outlook remains bright, as suggested by many investor banks and think tanks,” he said.
The minister said sluggish employment was a “common agony shared by the world,” but the situation could improve in South Korea in the second half.
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