The South Korean gross domestic product grew in the slowest pace in three quarters during the fourth quarter of last year, as exports the main pillar for recovery declined, while domestic demand weakened. Economic conditions are pressuring policy makers to keep interest rates at its low levels to strengthen recovery that is not solid enough at the current stage to exit the expansionary policy.
The South Korean gross domestic product grew 0.2% in the fourth quarter of last year less than the 3.2% in the previous three months, and it came lower than the analysts' estimates of 0.5%. The nation's GDP grew 6.0% in the quarter ended December from a year earlier less than the forecasted 6.6%, while the previous reading was 0.9%.
Economic growth slowed by the end of 2009 as goods exports slipped 1.8% in the three months ended December 31, while corporate investment slowed to 4.7% from a previous 10.4% in the third quarter, which had a negative effect on Asia's fourth largest economy that was one of few major economies skirted technical recession when it expanded 0.1% in the first three months of last year.
Moreover, domestic demand weakened as the government's stimulus measures are waning; having Private consumption falling 0.1% in 4Q, after it climbed 1.5% in the previous three months, while government spending dropped 2.9%.
The drop in exports and domestic demand seen in the fourth quarter of last year pressured Korean manufacturers to lower production levels after restocking inventories. Yet, today's report showed manufacturing edged down by 1.3%.
The Bank of Korea kept interest rates at the low record of 2.0% to give more time for the economy to benefit from low borrowing costs, worth mentioning that the central bank cut interest rates by 3.25% between October 2008 and February 2009.
However, Policy makers are facing pressures from the government to keep borrowing costs at its current level to avoid more gains for the local currency and support the exports sector that should guarantee a solid recovery for the economy, keeping in mind that exports account for 60% of the GDP.
On the other hand, the Korean government increased this year's budget by 3% to 292.8 trillion won ($256 billion) to support the economy, while the government pledged to accelerate distributing funds, which could be added as a sign of optimism in the upcoming period.
Business confidence rose after the government said it will provide an allowance and tax breaks for unemployed citizens to ease deteriorations in the labor market. Also combined sales in the three major department stores inclined at the fastest pace in 16 months to signal improvements in retail sales.
Yet, we can say that Asia's fourth largest economy is on the right way to recovery especially with conditions in the Asian region continue to improve led by China. The government expects exports to incline 13% this year to record $410 billion alongside higher demand from trade partners that will help the Korean economy to realize full recovery.
The South Korean gross domestic product grew 0.2% in the fourth quarter of last year less than the 3.2% in the previous three months, and it came lower than the analysts' estimates of 0.5%. The nation's GDP grew 6.0% in the quarter ended December from a year earlier less than the forecasted 6.6%, while the previous reading was 0.9%.
Economic growth slowed by the end of 2009 as goods exports slipped 1.8% in the three months ended December 31, while corporate investment slowed to 4.7% from a previous 10.4% in the third quarter, which had a negative effect on Asia's fourth largest economy that was one of few major economies skirted technical recession when it expanded 0.1% in the first three months of last year.
Moreover, domestic demand weakened as the government's stimulus measures are waning; having Private consumption falling 0.1% in 4Q, after it climbed 1.5% in the previous three months, while government spending dropped 2.9%.
The drop in exports and domestic demand seen in the fourth quarter of last year pressured Korean manufacturers to lower production levels after restocking inventories. Yet, today's report showed manufacturing edged down by 1.3%.
The Bank of Korea kept interest rates at the low record of 2.0% to give more time for the economy to benefit from low borrowing costs, worth mentioning that the central bank cut interest rates by 3.25% between October 2008 and February 2009.
However, Policy makers are facing pressures from the government to keep borrowing costs at its current level to avoid more gains for the local currency and support the exports sector that should guarantee a solid recovery for the economy, keeping in mind that exports account for 60% of the GDP.
On the other hand, the Korean government increased this year's budget by 3% to 292.8 trillion won ($256 billion) to support the economy, while the government pledged to accelerate distributing funds, which could be added as a sign of optimism in the upcoming period.
Business confidence rose after the government said it will provide an allowance and tax breaks for unemployed citizens to ease deteriorations in the labor market. Also combined sales in the three major department stores inclined at the fastest pace in 16 months to signal improvements in retail sales.
Yet, we can say that Asia's fourth largest economy is on the right way to recovery especially with conditions in the Asian region continue to improve led by China. The government expects exports to incline 13% this year to record $410 billion alongside higher demand from trade partners that will help the Korean economy to realize full recovery.
