Korea: Growth remains strong in first quarter
April 26, 2011
In the first quarter, GDP expanded 4.2% over the same period the previous year. The result represented a slight moderation compared to the 4.7% expansion recorded in the previous quarter and undershot market analysts' expectations, which had the economy expanding 4.5% in the first quarter. The first quarter reading was driven by a strong external sector, while the contribution of domestic demand deteriorated compared to the previous quarter. Total consumption increased 2.7% annually, down from the 3.0% rise recorded in the previous quarter. Private consumption inched up from the previous quarter (Q4 2010: +2.9%; Q1 2011: +3.0%), but was not enough to compensate for the deceleration in government consumption (Q4 2010: +3.2%; Q1 2011: +1.6%). Gross fixed investment contracted 2.2% annually, which contrasted the 3.4% expansion recorded in the fourth quarter. However, the reading was largely due to an unfavorable comparison base, as gross fixed investment had expanded a strong 12.5% in the first quarter of 2010. Meanwhile, the net contribution from the external sector to overall growth rose from 1.7 percentage points to plus 3.3 percentage points, as exports outpaced imports. Exports of goods and services increased 16.8% annually (Q4: +15.7% yoy) while imports rose 10.8% (Q4: +14.2% yoy). A quarter-on-quarter comparison corroborates the positive result suggested by the annual data, as the economy expanded 1.37% over the previous quarter in seasonally adjusted terms, up from the 0.50% increase observed in the fourth quarter. The Central Bank expects GDP growth to moderate to 4.5% in 2011, before picking up again in 2012, when the economy is expected to grow at a 4.8% clip.
Author: Armando Ciccarelli, Head of Data Solutions