Published: January 25, 2010
By THE ASSOCIATED PRESS
SEOUL, South Korea (AP) -- South Korea's economic growth slowed in the final three months of 2009 due to weakness in manufacturing, construction and exports, a sign that the country's vigorous recovery from the depths of the global meltdown a year ago is losing steam.
Gross domestic product grew 0.2 percent in the three months ended Dec. 31 compared with the previous quarter, the Bank of Korea said Tuesday. The economy had expanded 3.2 percent in the third quarter, the strongest performance in more than seven years.
South Korea's growth figures come as Asian countries have been leading a recovery in the world economy, which slumped in the aftermath of the global financial crisis that struck in September 2008.
China, expected to soon overtake Japan as the world's second-largest economy, grew 10.7 percent in the fourth quarter and expanded 8.7 percent in 2009, though concerns have emerged that authorities will curb lending to keep the economy from overheating. India's economy grew 7.9 percent in the July-September period, the fastest pace in six quarters.
Other economies in the Asia-Pacific region, however, have shown signs of renewed lethargy. Japan grew a revised 1.3 percent on an annualized basis in the third quarter in a marked slowdown from the second, while Australia's expansion also decelerated. Singapore's economy, meanwhile, actually shrank in the fourth quarter after two straight surges.
South Korea, Asia's fourth-largest economy, grew in every quarter of 2009 after shrinking 5.1 percent in the final three months of 2008. That result had led to dire predictions the economy could contract as much as 3 percent for the entire year.
The central bank said Tuesday that the economy managed to expand 0.2 percent for all of 2009, though that was sharply down from the 2.2 percent growth recorded the year before.
The Bank of Korea steadily slashed its benchmark interest rate to a record low 2 percent and the government pumped nearly 50 trillion won ($43.4 billion) worth of stimulus in the form of extra spending and tax cuts into the economy from late 2008 through 2009 as authorities worldwide took similar measures to revive growth.
South Korea's economy began a slow ascent, growing 0.1 percent in the first quarter, 2.6 percent in the second and 3.2 percent in the third, boosted by a gradual recovery in export markets and aided by weakness in the South Korean won, which made the country's products more competitive.
But the central bank said that in the fourth quarter, manufacturing contracted 1.3 percent, construction shrank 1.4 percent and exports fell 1.8 percent, putting the brakes on growth.
The South Korean won rose 17 percent against the dollar on average during the fourth quarter from the year before, according to Bank of Korea data.
The Organization for Economic Cooperation and Development in a November report lauded South Korea's recovery as "one of the earliest and strongest" in the 31-member group and predicted that a "sustained pick up in exports" would bolster growth in 2010 and 2011.
South Korea recorded a record high trade surplus of $41 billion in 2009 despite a 20 percent decline in exports as imports fell by an even bigger margin of nearly 26 percent on a decline in oil prices and weak domestic demand. Trade recovered from a deficit of $13 billion in 2008, the country's first since 1997.
But the unemployment rate, which had shown signs of improvement, rose in December to 3.5 percent, the second straight month of increase. The central bank said in a December report that employment levels are unlikely to return to pre-crisis levels as small business failures have become a "structural factor."
Compared with the same period the year before, South Korea's economy grew 6 percent in the final three months of last year. That marked the second straight quarter of year-on-year expansion by that measure.
The fourth-quarter GDP figures are preliminary and subject to revision.
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