South Korean economy grows faster than expected at 2.6 per cent

Sep 3, 2009, 5:58 GMT

   Seoul - South Korea's economy grew at a faster rate in the second quarter than initially estimated, expanding 2.6 per cent from the previous quarter, thanks to government stimulus measures and rising exports, the central bank said Thursday.

   The rate was the fastest growth in more than five years and bettered an estimate of 2.3 per cent made in July.

   However, the Bank of Korea also said that in comparison to the second quarter of 2008, South Korea's gross domestic product (GDP) shrank 2.2 per cent from April to June.

   'More private spending and increased investments in facilities and construction projects led to better results,' the Bank of Korea said.

   Technology companies and carmakers in Asia's fourth-largest economy increased their production in the second quarter, and the information-technology sector was able to expand its exports, it said.

   Exports for the export-dependent economy rose 14.7 per cent in the second quarter from the previous quarter while consumer spending was up 3.6 per cent thanks to increased sales of durable goods, such as cars. Car sales were helped by tax cuts.

   Second-quarter GDP growth was well above the 0.1-per-cent growth seen in the first quarter when South Korea came within a hair's breath of recession after its GDP fell 5.1 per cent in the final quarter of 2008.

   To combat the downturn, the government in March approved a record 28.9-trillion-won (23.19-billion-dollar) supplementary budget aimed at kick-starting the economy. It included spending on infrastructure projects and job-creation initiatives.

   The Bank of Korea predicted in July that South Korea's economy would shrink 1.6 per cent this year but return to 3.6-per-cent growth next year. Last year, its GDP grew 2.2 per cent.