ID :
119012
Tue, 04/27/2010 - 17:07
Auther :

S. Korean economy grows 1.8 pct in Q1

(ATTN: RECASTS lead; ADDS remarks by BOK senior official and economists in paras 5-6, 13-14; UPDATES throughout)
By Kim Soo-yeon
SEOUL, April 27 (Yonhap) -- The growth of the South Korean economy picked up
sharply in the first quarter on solid exports and improving domestic demand, the
central bank said Tuesday, underpinning optimism about the economic recovery.
The country's gross domestic product (GDP), the broadest measure of economic
performance, grew 1.8 percent in the January-March period from three months
earlier, accelerating from a 0.2 percent on-quarter expansion in the fourth
quarter of 2009, according to an advance estimate by the Bank of Korea (BOK).
The quarterly growth rate, the fastest in six months, was more upbeat than a 1.6
percent expansion predicted by the BOK on April 12.
From a year earlier, Asia's fourth-largest economy expanded 7.8 percent in the
first quarter, the sharpest growth in more than seven years. The on-year growth
was also higher than an earlier projection of 7.5 percent.
"The 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," Kim Myung-kee, director general of the BOK's economic statistics
division, told a press conference.
Kim said as inventory adjustment wraps up, corporate restocking is expected to
lend support to production.
Signs of an economic recovery have sparked debate over the appropriate timing of
a rate hike. The key rate has remained unchanged at a record low of 2 percent for
14 straight months.
Exports, which account for about 50 percent of South Korea's GDP, expanded 3.4
percent on-quarter in the first quarter. Private spending, one of the main growth
engines of the Korean economy, gained 0.6 percent.
Reflecting optimism about the economic recovery, the BOK upgraded its 2010 growth
forecast for the Korean economy to 5.2 percent from an earlier projection of 4.6
percent. The government has put its economic growth estimate at 5 percent for
this year.
The International Monetary Fund said earlier that, as the growth momentum of the
economy is strong, there is room over the near term for South Korea to begin to
normalize the key rate gradually.
Over the weekend, finance chiefs from the Group of 20 advanced and emerging
economies acknowledged that the world's economies are recovering at different
paces, raising the need to take varied policy actions in exiting from emergency
steps.
But many economists said that the BOK is not likely to raise borrowing costs, at
least in the first half, as the new BOK chief is viewed as being in line with the
government, which opposes a near-term rate increase.
"The strong annual growth figure was due to a base effect. The growth momentum is
likely to slow after peaking in the first quarter, given the still-murky economic
outlook and job market conditions," said Lee Sung-kwon, a senior economist at
Shinhan Investment Corp. He said a rate hike may be pushed back into next year.
Jun Moon-seok, an economist at Hanwha Securities Co., said that because a
full-fledged recovery in facility investment would take more time, a potential
rate increase is likely to come in the third quarter.
BOK Gov. Kim Choong-soo, widely seen as dovish, said the central bank could
consider raising the rate only after becoming confident that the private sector
is making a sustainable recovery.
The BOK slashed the benchmark seven-day repo rate by a total of 3.25 percentage
points between October 2008 and February 2009 in a bid to help stem the sharp
economic downturn.
sooyeon@yna.co.kr
(END)

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