Korea: Economy strengthens in the fourth quarter
January 25, 2011
In the fourth quarter, GDP expanded 4.8% over the same period the previous year. The result represented a slight improvement compared to the 4.4% expansion recorded in the previous quarter and was also a tad above market expectations, which saw the economy expanding 4.6% in the fourth quarter. The fourth quarter reading was driven by a strong external sector, while the contribution of domestic demand deteriorated compared to the previous quarter. Total consumption increased 3.3% annually, up from the 3.2% rise recorded in the previous quarter. Government spending picked up compared to the previous quarter (Q3 2010: +2.8% yoy; Q4 2010: +3.9% yoy), which compensated for weaker private consumption growth (Q3 2010: +3.3% yoy; Q4 2010: +3.2% yoy). Gross fixed investment grew 2.1% annually, which marked a significant moderation compared to the 6.6% expansion recorded in the third quarter. Meanwhile, the net contribution from the external sector to overall growth swung from minus 0.5 percentage points to plus 1.2 percentage points, as exports outpaced imports. Exports of goods and services increased 14.9% annually (Q3: +11.1% yoy) while imports rose 14.6% (Q3: +14.7% yoy). A quarter-on-quarter comparison corroborates the positive result suggested by the annual data, as the economy expanded 1.73% over the previous quarter in seasonally adjusted terms, up from the 1.13% increase observed in the third quarter. On a full-year basis, the economy expanded 6.1% in 2010, which was up from the 0.2% increase recorded in 2009 and was in line with the Central Bank's expectations. The result represented the strongest annual expansion in seven years. 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 4.7% clip.
Author: Armando Ciccarelli, Head of Data Solutions