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South Korea's economy accelerated to 5 percent growth in 2006

South Korea's economy accelerated to 5 percent growth in 2006

South Korea's economy accelerated in 2006 on growth in exports, capital investment and consumer spending, the Bank of Korea said Thursday, though unexpectedly slowed in the final three months of the year.
Gross domestic product grew 5 percent last year, matching government forecasts, and up from 4 percent growth in 2005, according to preliminary figures released by the central bank.
The expansion in the 758 trillion won (US$810 billion; euro623 billion) economy was fueled largely by healthy global demand for South Korean exports like flat-panel televisions and automobiles.
"Exports were pretty strong because the global economy was better than in the previous year," said Lim Ji-won, senior economist at JP Morgan in Seoul. "The composition of (South) Korean exports is very well diversified, so they can penetrate new markets."
However, the world's 10th-largest economy slowed to 4 percent growth in the fourth quarter from the same period the year before, down from the 4.8 percent rate notched in the third quarter and worse than the 4.2 percent growth forecast by economists.
A drop in inventories was largely responsible, economists said, a development that suggests companies may need to step up manufacturing this year, which could prove help propel the economy forward.
The inventory drawdown "roughly dragged headline GDP growth down by 0.9 percentage point," economists at Goldman Sachs said in a report.
Exports declined 0.3 percent after growing 2.1 percent in the third quarter, the bank said. Capital spending meanwhile, barely grew quarter on quarter, expanding just 0.1 percent.
The central bank does not release an annualized figure for quarterly growth, though JP Morgan's Lim said the fourth-quarter figure correlates to an annual pace of 3.4 percent.
"It's been confirmed that the (economy) remained on the path the BOK had expected," said Lee Kwang-june, a director-general at the bank's statistics department, referring to last year's performance.
"And in 2007, (growth) will also remain on the path," Lee said, suggesting the bank is confident of achieving its forecast of a 4.4 percent expansion in 2007.
In 2006, exports grew 13 percent, compared with a 9.7 percent gain the year before. Capital spending expanded 7.5 percent, compared with 5.1 percent. Private consumption, which is mostly consumer spending, grew 4.2 percent, beating the previous year's 3.2 percent performance.
South Korea's export-oriented economy managed to withstand a strengthening currency. The won gained 8.8 percent in 2006 against the U.S. dollar. A stronger won can hurt exports by making South Korean products more expensive in overseas markets.
The manufacturing sector grew 5.7 percent in the final three months of last year from the year before, slowing from an 8.8 percent in the third quarter.


Updated : 2021-10-22 12:48 GMT+08:00