2010 GDP growth is fastest in 8 years

By Kim Tong-hyung

Korea’s gross national income (GNI) per person reentered the $20,000 level last year as the economy departed from the grips of the global downturn, the Bank of Korea (BOK) said Wednesday.

The economy grew 6.2 percent in 2010, representing the fastest rate in eight years, although this had much to do with a base effect created by a dismal 2009. The increase in wealth appeared to be coupled with widened income inequality, proving that the fruits of economic growth benefit people differently.

``Of the countries with over 20 million in population, only about 10 of them have per capita income of over $20,000, so we could say that we are now among the 10 richest nations,’’ said Kim Young-bae, director of the central bank’s economic statistics division.

``Should the country manage a 4.5 percent economic growth this year, that would be enough to push the per capita income figure to a record high.’’

The GNI per capita of $20,759 in 2010 was a significant improvement from the $17,193 the previous year and was the first time the figure surpassed the $20,000 threshold since 2007, when it hit an all-time high of $21,695. The Korean won appreciating 2.62 percent to the dollar last year apparently had something to do with last year’s improvement.

When adjusted for purchasing power, Korea’s GNI grew 5.5 percent last year, the fastest gain in eight years. Average disposable income per household increased by 9.4 percent year-on-year, the central bank said.

Last year’s nominal gross domestic product (GDP) reached $1.17 trillion, up 21.6 percent from the previous year and exceeding $1 trillion for the first time since 2007. When adjusted to inflation, the GDP grew 6.2 percent annually in 2010, according to the BOK, which revised its earlier estimate of a 6.1 percent increase. This represents the fastest growth since a 7.2 percent expansion during 2002.

The employee income distribution rate, an inequality measure used by the bank to see how much of the added-value generated by firms is shared with their workers, was down 1.7 percent year-on-year to 59.2 percent. It was the first time the figure dipped below 60 percent since 2004.

The export of goods, which accounts for about 50 percent of the Korean economy, grew 15.8 percent annually last year, while consumption increased by 4.1 percent. Facility investment jumped 25 percent last year while construction investment declined 1.4 percent.

The Lee Myung-bak government is currently targeting economic growth of 5 percent this year while keeping inflation below 3 percent. Although the rising costs of fuel and other commodities and the political unrest in the Arab world loom as downside risks to the economy, BOK officials say the recovery in the United States and other major economies may offset the negatives.

In December, the BOK forecast the Korean economy to expand by 4.5 percent this year on 3.5 percent inflation. The bank will announce its revised economic outlook next month.

The government has been struggling to deal with soaring inflation, which appears to be coupled with subduing economic activity.

Consumer prices rose 4.5 percent in February from a year ago, significantly higher than the government’s 3 percent target, while producer prices jumped 6.6 percent, the fastest jump in 27 months. The rising inflationary pressures forced the Bank of Korea to raise interest rates by a quarter of a percentage point to 3 percent earlier this month.