GDP growth slowest in 30 months

By Kim Tong-hyung

The nation’s economy grew 2.8 percent from a year earlier in the first three months of the year, the slowest pace in 30 months, the Bank of Korea (BOK) said Thursday.

It is the first time since the third quarter of 2009 that the gross domestic product (GDP) growth rate has fallen below the 3 percent mark.

However, the economy grew 0.9 percent from a quarter earlier, the fastest quarterly pace in a year, reflecting a base effect from lower growth in the previous quarter.

Despite the slowest year-on-year growth in 30 months, the central bank was cautiously optimistic about its outlook.

``It seems that the economy has improved compared to the fourth-quarter. It’s going back to the trajectory of growth it had shown in the second and third quarters of last year,’’ said Kim Young-bae, director general of the BOK’s GDP analysis team.

He said the rise in industrial output, technology sector investment and better-than-expected consumer spending measurements left room for some optimism.

``We have been emphasizing quarter-to-quarter measurements over year-on-year data since 2005, and this is also a case where quarterly numbers qualify as a more accurate and timely indicator,” he said.

The government has stressed early expenditure of the annual budget to spur the economy and the private sector has been soaking this up, he said.

“The consumer spending numbers were good, while facility investment increased not only in the semiconductor sector but in the machinery industry as well,’’ he said.

Skepticism lingers

While financial authorities are itching to declare that the worst has passed for the economy and there is nowhere to go but up, analysts remained skeptical.

Exports continue to be shaky, evidenced by a 1.4 percent decline measured in the month of March, as sluggishness in major markets like Europe, the United States and China takes a toll on the country’s trade-reliant economy. And it’s hard to imagine consumption picking up the slack when family finances are in bad shape.

According to BOK officials, aggressive fiscal spending contributed greatly to the first quarter’s 0.9 percent growth accounting for nearly a third of the GDP expansion. The push is obviously temporary as only 40 percent of the government budget will be available in the second half of the year.

``The numbers aren’t really impressive when excluding the influence of front-loaded budget spending. There’s not much reason to think that consumption will maintain the growth level throughout the year and we have yet to see a believable turnaround in exports.’’ said Oh Suk-tae, a senior economist from SC First Bank.

``BOK policymakers can talk all they want about how the economy may have hit bottom and is ripe for a rebound, but the reality is that this is an economy that can’t fully control its destiny and will be influenced dramatically by external factors.’’

First-quarter exports gained 3.4 percent from the fourth quarter and 5 percent annually on the strength of automobiles and petrochemical products, which managed to offset declining shipments in mobile phones and steel products.

Consumer spending rose by 1 percent from the fourth quarter and by 1.6 percent from a year earlier, with personal computers and medicine among the items that saw visible increases in sales.

Facility investment rose 10.8 percent on a quarterly basis and 9.1 percent year-on-year thanks to a rebounding semiconductor sector. Manufacturing production rose by 2.2 percent from the fourth quarter, while services gained 0.2 percent during the same span.

The construction and agricultural sectors continued to pull the economy back, falling 1 percent and 4.3 percent from the fourth quarter respectively.