S. Korean economy grows 2.9 pct in Q3

(ATTN: RECASTS lead; UPDATES with BOK official's comments in paras 4-6; TRIMS
throughout)
By Kim Soo-yeon
SEOUL, Oct. 26 (Yonhap) -- The South Korean economy grew at the fastest pace in
more than seven years in the third quarter on improving domestic demand and
robust exports, the central bank said Monday, lifting optimism about an economic
recovery.
The country's gross domestic product (GDP), the broadest measure of economic
performance, expanded 2.9 percent in the July-September period from three months
earlier, up from a 2.6 percent gain in the second quarter, according to an
advance estimate by the Bank of Korea (BOK).
The third-quarter reading marked the fastest growth since a 3.8 percent advance
in the first quarter of 2002. Compared with a year earlier, the economy expanded
0.6 percent last quarter, marking the first on-year growth in four quarters.
"The Korean economy is recovering fast. In the third quarter, the private sector
led a recovery," Kim Myung-kee, director general of the BOK's economic statistics
division, told a press conference. "But because the third-quarter growth mostly
came as destocking was wrapping up, it will take some time for people to feel the
economic recovery."
Kim also hinted that the Korean economy may not contract this year compared to
2008 if local economic activity continues to improve and the global economy
maintains its recovery phase. The BOK earlier forecast a 1.6 percent contraction
in 2009.
"The economic growth rate is likely to surpass 5 percent on-year in the fourth
quarter," he added.
Asia's fourth-largest economy is fast emerging from its worst downturn in more
than a decade, helped by aggressive fiscal spending and rate cuts. Hit by the
global economic recession, the Korean economy tumbled 5.1 percent on-quarter in
the last three months of 2008 before rising 0.1 percent in the January-March
period.
The data is underpinning optimism that the Korean economy is recovering at a
faster-than-expected pace.
Exports, which account for about 50 percent of South Korea's GDP, rose 5.1
percent on-quarter in the third quarter, after jumping 14.7 percent in the second
quarter.
Private spending, one of the main growth engines of the Korean economy, increased
1.4 percent, compared with a 3.6 percent gain in the preceding quarter.
Facility investment climbed 8.9 percent after rising 10.1 percent in the second
quarter, while construction investment declined 2.1 percent, compared with a 1.7
percent expansion three months earlier.
Economists say that despite upbeat economic readings, the central bank is likely
to freeze the key rate throughout this year, given lingering uncertainty about
the economic outlook.
"The third-quarter economic performance results came as a surprise. But the
growth seemed to be aided by inventory effects," said Goh You-sun, an economist
at Daewoo Securities Co. "The BOK is expected to keep the rate put this year with
any rate hike coming in the early part of next year."
BOK Gov. Lee Seong-tae said on Oct. 15 that the local economy is expected to
contract by less than 1 percent this year. Lee downplayed the possibility of the
country experiencing a "double-dip" recession, in which a second downturn follows
a short-lived recovery.
The BOK slashed the rate by a total of 3.25 percentage points to a record low of
2 percent between October 2008 and February in an effort to boost the sagging
economy.
sooyeon@yna.co.kr
(END)