South Korea's economy shows stronger growth

Seoul: South Korea's economy expanded 3.2 per cent in the third quarter, the central bank said yesterday, a better performance than initially estimated amid stronger growth in manufacturing, exports and services.

The revised figure for the three months ended September 30 compared with the previous quarter remains the country's strongest growth in more than seven years since an expansion of 3.8 per cent in the first quarter of 2002, according to Bank of Korea (BOK) figures.

The bank said in October that Asia's fourth-largest economy had grown 2.9 per cent. The latest estimate is based on more complete data.

The 3.2 per cent figure equates to annualised growth of 13.6 per cent, according Lim Ji-won, economist at JP Morgan in Seoul. The BOK does not provide an annualised number.

The stronger quarterly growth adds to mounting evidence that South Korea is recovering from the global slowdown. GDP has expanded three straight quarters after contracting 5.1 per cent in the final three months of last year amid the shock of the worldwide financial meltdown. Export markets for South Korean products had withered as consumers around the world slashed spending. Manufacturing expanded 9.8 per cent in the third quarter, compared with the initial estimate of 8.7 per cent, the central bank said. Growth figures for capital spending, private consumption, exports and services were also revised upward.

Expansion

The Bank of Korea also said that the economy grew 0.9 per cent in the third quarter compared with the same period last year. That was higher than the initial estimate of a 0.6 per cent expansion. Beginning in the fourth quarter last year the economy had contracted for three straight quarters compared with the year before.

Exports in November posted their first year-on-year gain in 13 months, increasing 18.8 per cent to $34.3 billion (Dh125.9 billion). The country's foreign currency reserves hit a record high of $270.89 billion in November. And the jobless rate fell to 3.2 per cent in October, the lowest level in 11 months.

Policy makers

The Bank of Korea steadily slashed its benchmark interest rate after the onset of the global financial crisis to help boost the economy. Attention is now focused on when Governor Lee Seong-tae and other bank policy makers will decide to begin raising the rate from a record low 2 per cent. The next rate-setting policy meeting is scheduled for December 10.

Economists have broadly expected the bank to begin gradually lifting the rate in the first quarter of 2010.

Pressure from the government against a perceived early exit from the low rate strategy and the approaching conclusion of Lee's four-year term as central bank governor at the end of March have injected some uncertainty into that scenario, said JP Morgan's Lim.