South Korea’s Fourth-Quarter Expansion Matches EstimatesEunkyung Seo and Cynthia Kim
South Korea’s economic growth matched analysts’ estimates in the fourth quarter, as the central bank kept the benchmark interest rate at the lowest level since 2010.
Gross domestic product gained 0.9 percent from the previous quarter, when the increase was 1.1 percent, the Bank of Korea said today in a statement in Seoul. That matched the median 0.9 percent estimate of 12 economists surveyed by Bloomberg News. From a year earlier, growth was 3.9 percent.
The Bank of Korea is projecting 3.8 percent growth this year, the fastest pace since 2010, when Asia’s fourth-largest economy was rebounding from the global financial crisis. At the same time, the government is monitoring the risks posed by weakness in the yen, which aids rival exporters in Japan, and the winding back of U.S. stimulus measures.
“With signs of rising trade from stronger global demand, we believe Korea remains on track for a gradual export-led recovery,” HSBC Holdings Plc. economist Ronald Man said in a report today. “Downside risks from a weak yen mean Korean officials will likely support growth by keeping policy accommodative for the time being.”
The Kospi index closed down 1.2 percent and the won fell 0.6 percent against the dollar to 1,073.79 in Seoul.
While the October-December expansion was the slowest in three quarters, it was faster than the economy registered in any quarter in 2012.
Exports contributed more to growth than domestic demand in 2013, but the gap narrowed from a year earlier, said Jung Yung Taek, director general at the BOK’s Economic Statistics Department.
Buoyed by rising exports, the private sector led the fourth-quarter expansion. Consumer spending and investment in facilities also increased, while government spending stalled due to a drop in tax revenue, Jung told reporters in Seoul.
Governor Kim Choong Soo, set to retire on March 31, held the benchmark rate at 2.5 percent on Jan. 9 after a surprise cut in May.
South Korean exporters need to penetrate into new markets amid concerns a weaker yen may hurt their competitiveness, Finance Minister Hyun Oh Seok said in a meeting in Seoul today.
Hyundai Motor Co., South Korea’s largest carmaker, today reported fourth-quarter profit that missed analysts’ estimates after a stronger won eroded export earnings and domestic sales fell.
The International Monetary Fund this week raised its forecast for global growth this year to 3.7 percent as expansions in the U.S. and U.K. accelerate, and urged advanced economies to maintain monetary accommodation to strengthen the recovery.
South Korea’s recovery is bolstering employment while the property market is faring better than it did last year, Hyun said on Jan. 15. The government will seek to balance between exports and domestic demand for sustainable growth, Hyun said on that day.