South Korea's economy grew at its fastest pace in eight years in 2010 even as the expansion slowed in the final quarter amid weakness in capital spending, manufacturing and construction.
Gross domestic product advanced 6.1 percent last year, the Bank of Korea announced Wednesday, marking the best performance since a 7.2 percent surge in 2002. South Korea grew a meager 0.2 percent in 2009 amid the global economic slowdown that followed the worldwide financial meltdown of late 2008.
The robust result for 2010 was achieved "owing to the buoyancy of exports and the ensuing pick-up in manufacturing and facilities investment," the central bank said in a release.
But growth in Asia's fourth-largest economy, which is home to manufacturing giants including Samsung Electronics Co. and Hyundai Motor Co., slowed in the three months ended Dec. 31, expanding 0.5 percent from the third quarter when it grew 0.7 percent.
Still, the result marked the eighth straight quarter of growth for South Korea, which had contracted during the final six months of 2008 during the global downturn.
The figures are preliminary and may be revised.
South Korea's fourth-quarter growth figures contrasted with those of fellow Group of 20 member Britain, which reported Tuesday that its economy unexpectedly contracted 0.5 percent in the final three months of last year, raising fears it could head back into recession.
The BOK expects South Korea's growth to slow to a more normal 4.5 percent in 2011 after last year's bounce back from the crisis — matching a forecast by the International Monetary Fund — before picking up to 4.7 percent in 2012. The South Korean government says growth could come in at about 5 percent.
The latest GDP figures come as South Korea and other economies in Asia excluding Japan take steps to tamp down rising inflation. The Bank of Korea earlier this month raised its key interest rate to 2.75 percent from 2.50 percent and economists expect more hikes this year.
The central bank said last month that 2011 consumer price inflation was set to increase to 3.5 percent from 2.9 percent last year. The country's consumer price index rose to 3.5 percent in December from the same month the year before. The bank's inflation target is 3 percent, though that includes what it calls a "tolerance range" of plus or minus 1 percentage point.
Highlighting inflation worries, South Korean consumer confidence fell amid as concern grew about future price hikes. The composite consumer sentiment index for January recorded a reading of 108, down from 109 in December and the second straight monthly decline, though it remained well above the benchmark level of 100, a separate BOK report showed Wednesday.
For the fourth quarter, the bank said that facilities investment contracted 1.6 percent in the fourth quarter after growing 5.5 percent in the previous three-month period. Manufacturing decreased 0.7 percent following an expansion of 2.2 percent and construction plummeted 5.3 percent after growth of 0.6 percent.
On the positive side, exports increased 2.4 percent and private consumption, which is mostly consumer spending, gained 0.3 percent, though that was sharply weaker than the 1.3 percent recorded in the previous quarter.
South Korean financial markets gained after the release of the growth figures.
The benchmark stock index rose 1.1 percent to close at 2,110.46. The South Korean won, meanwhile, strengthened 0.2 percent to finish at 1,116 to the dollar.
- Gross domestic product
- consumer spending
- the Bank of Korea
- South Korea s economy
- South Korea