SKorea economy grows 0.1 pct in Q1, avoids recession

Thursday, April 23, 2009 at 9:20 PM Posted by Beijing News


South Korea has avoided recession by recording positive economic growth in the first quarter after a sharp fall in exports moderated, according to the central bank.

Unprecedented interest-rate cuts and government stimulus spending also helped the export-dependent nation record 0.1 percent growth in January-March compared to the previous quarter.

The economy had shrunk 5.1 percent quarter-on-quarter in October-December 2008, its biggest drop in a decade. A recession is defined as two successive quarters of negative growth.

Despite the positive news, Asia's fourth-largest economy still shrank 4.3 percent in the first quarter year-on-year after contracting 3.4 percent year-on year in the final quarter of 2008.

"Private spending and construction investment swung to gains and a decline in exports slowed down in the first quarter," the Bank of Korea said in a statement.

Exports fell 3.4 percent quarter-on-quarter in the three months ended March 31 after declining 12.6 percent in the fourth quarter.

Private spending grew 0.4 percent quarter-on-quarter compared with a 4.6 percent contraction in the previous period.

Capital investment shed 9.6 percent, after falling 14.2 percent three months earlier. Construction investment rose 5.3 percent compared with a three percent decline in the final quarter of last year.

The government last month unveiled a 28.9-trillion-won 21.3-billion-dollar extra budget to stimulate the economy, complementing extra spending announced earlier.

The central bank has cut its base rate by 325 basis points since October to a record low two percent.

Finance Minister Yoon Jeung-Hyun said Thursday there were "some positive signs" in the economy, such as recent trade surpluses, the successful issuance of sovereign bonds overseas and positive industrial production data.

But he said uncertainty remains, underlined last month when the country recorded the highest number of job losses for a decade.

"The Korean economy is still on a downturn trend although a sharp decline in economic activity eased considerably in the first quarter," Choi Chun-Sin, head of the central bank's economic statistics division, told reporters.

"We need to see at least one percent on-quarter growth before we can say the economy has hit bottom."

Some economists were more bullish.

"The economy reached its bottom in the fourth quarter on a quarterly basis and in the first quarter on a yearly basis," Hana Daetoo Securities economist Kim Jae-Eun told Dow Jones Newswires.

"I'm much more hopeful now."

It predicted modest growth of 1.5 percent next year, sharply lower than its 4.2 percent growth figure predicted three months earlier.



Edmonds

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