South Korea’s economy expanded at the fastest pace in 11 years last year, helped by a jump in exports and construction activity, tempering declines in capital investment and a slow recovery in the COVID-19-hit service sectors.
Record exports drove the rebound, but swathes of the economy have fallen behind. Jobs are still vanishing across manufacturing and service sectors, a reminder that South Korean President Moon Jae-in’s promises to boost employment have not materialized.
The Bank of Korea (BOK) expects GDP to grow 3 percent this year, as Asia’s fourth-largest economy benefits from strength in semiconductor exports and increased public spending, although record domestic COVID-19 cases this week are a threat to consumption.
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“Global demand for our chips is resilient and strong exports will keep [South Korea’s] growth momentum solid,” BOK economics statistics bureau head Hwang Sang-pil said. “People are getting used to social distancing curbs. Activity was slower in December, but the hit is smaller than before.”
The economy expanded a seasonally adjusted 1.1 percent in the October-December period from three months earlier, beating the 0.9 percent expansion tipped in a Reuters poll and up from a 0.3 percent rise in the third quarter.
From a year earlier, the economy expanded 4.1 percent in the fourth quarter, also beating a median forecast of 3.7 percent in the poll.
The BOK on Jan. 14 raised its benchmark interest rate to pre-pandemic levels and signaled it might tighten further as growth and inflationary pressures remain strong.
South Korea’s exports expanded at their fastest annual pace in 11 years last year while the consumption recovery has been patchy due to social distancing curbs.
A recent Reuters poll of 20 economists forecast the economy would grow 2.9 percent this year, below the 3 percent projected by the BOK.
Yesterday’s data showed exports were the main driver of growth in the fourth quarter, jumping 4.3 percent quarter-on-quarter.
Growth was also helped by private consumption and construction investment, which climbed 1.7 percent and 2.9 percent respectively.
The service sector grew 1.3 percent in the fourth quarter, stronger than the third quarter, but slower than the second quarter.
Capital investment declined 0.6 percent quarter-on-quarter, following a 2.4 percent drop in the preceding three months.
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