(2nd LD) S. Korean economy shrinks 5.1 pct in Q4

(ATTN: RECASTS lead, para 2; UPDATES with central bank official's remarks in para 5,
11; ADDS more quotes in para 16)
By Kim Soo-yeon
SEOUL, March 27 (Yonhap) -- The South Korean economy shrank a revised 5.1 percent
last quarter, less than an earlier estimate, due to smaller falls in corporate
investment, the central bank said Friday.
The figure compares with the previous estimate of a 5.6 percent quarterly
contraction. From a year earlier, the country's gross domestic product (GDP)
contracted 3.4 percent in the October-December period, according to the Bank of
Korea (BOK).
The fourth-quarter figure marked the worst drop since the first quarter of 1998
when the nation's GDP, the broadest measure of economic performance, fell 7.8
percent on-quarter in the aftermath of the Asian financial crisis.
For all of 2008, Asia's fourth-largest economy grew a revised 2.2 percent, down
from an earlier 2.5 percent estimate and the slowest growth since 1998. In 2007,
the economy expanded 5.1 percent.
"The worldwide economic recession, sparked by the global financial rout, dented
the Korean economy last year," Choi Chun-sin, director general of the BOK's
economic statistics division, told a press conference. "Consumer and business
spending remained sluggish and export growth sharply eased."
The report comes three days after the government unveiled a 28.9 trillion won
(US$21.6 billion) extra budget, the biggest ever, aimed at creating more jobs and
jump-starting the sputtering economy. Of the total, it set aside 17.7 trillion
won for fiscal spending.
Exports of goods, which account for more than 50 percent of the local economy,
plunged 12.6 percent on-quarter in the fourth quarter, sharper than a previous
estimate of an 11.9 percent decline.
Private spending, one of the main growth engines of the South Korean economy,
fell 4.6 percent, compared with the 4.8 percent contraction previously estimated.
Facility investment tumbled 14.2 percent, compared with an earlier estimate of a
16.1 percent tumble while construction investment fell 3 percent, less than an
estimate of a 4 percent contraction.
Meanwhile, the country's gross national income, reflecting the actual purchasing
power of the population, dipped 0.8 percent on-year in 2008, marking the first
fall since 1998, as terms of trade worsened amid soaring raw materials costs.
"But terms of trade are improving as the country's import price growth has
slowed," Choi said.
Korea's gross national income per capita stood at $19,231 last year, down from
$21,695 in 2007, hit by the slowing growth and the won's sharp weakness. The
Korean currency tumbled 25.7 percent to the dollar last year.
The government and the central bank are making efforts to cushion the impact of
the global recession and the financial rout on the Korean economy by unveiling
stimulus packages and cutting the key interest rate. The Korean economy is widely
expected to post negative growth this year with Finance Minister Yoon Jeung-hyun
predicting a 2 percent contraction.
Yoon said on Tuesday that the additional spending, coupled with deregulation and
more corporate investment, could raise the country's GDP by 2 percentage points
and create 550,000 new jobs this year.
In March, the BOK froze the rate after six consecutive rate cuts to gauge the
effects of reductions on the economy and brace for a deeper economic downturn.
Between October and February, the central bank slashed the rate by a total of
3.25 percentage points.
"The expected effects of the government's stimulus package and the stabilization
of the foreign exchange market will likely ease pressure on the BOK about the
rate decision. The central bank is likely to stand pat on the rate in April,"
said Lee Sung-kwon, an economist at Goodmorning Shinhan Securities Co.
sooyeon@yna.co.kr
(END)