Korea: Economic growth moderates in 2011
January 26, 2012
In the fourth quarter, GDP expanded 3.4% over the same period the previous year. The result was an inch below both the 3.5% increase in the previous quarter and market analysts' expectations, which had the economy expanding at the same 3.5% pace. In the full year 2011, GDP expanded 3.6%, which was well below the strong 6.2% increase in 2010. The fourth quarter reading reflected a moderation in the contribution from the external sector to overall growth, while domestic demand improved somewhat on the back of a positive contribution from inventories. Total consumption increased 1.4% annually, down from the 2.3% rise recorded in the previous quarter, as both private consumption and government consumption moderated. Gross fixed investment deteriorated further, from a 2.0% contraction in the third quarter to a 3.0% drop in the fourth. However, total investment - which includes changes in inventories - accelerated to a 3.0% expansion, up from the 0.1% rise seen in the previous quarter. Meanwhile, the external sector's net contribution to overall growth fell from plus 2.2 percentage points in Q3 to plus 1.7 percentage points in Q4. Exports of goods and services increased 5.2% annually (Q3: +9.6% yoy) while imports rose a softer 2.3% (Q3: +6.0% yoy). A quarter-on-quarter comparison corroborates the moderation suggested by the annual data, as the economy expanded 0.35% over the previous quarter in seasonally adjusted terms, down from the 0.81% increase observed in the third quarter. The Bank of Korea expects the economy to grow 3.7% this year and to accelerate to a 4.2% expansion in 2013.