South Korean growth slows in third quarter

Oct 27, 2010, 6:48 GMT

Seoul - South Korea's central bank said Wednesday that economic growth slowed considerably in the third quarter as exports suffered from a rise in the won.

The Bank of Korea said gross domestic product in the July-September period was only 0.7 per cent up from the previous quarter. The April-June results showed 1.4-per-cent growth on the year's first quarter.

Year-on-year, the third quarter showed a 4.5-per-cent increase, compared to the previous quarter's 7.2-per-cent increase from a year earlier.

Exports, which contribute around 50 per cent to Asia's fourth-largest economy, rose 1.3 per cent from the previous quarter, compared to a quarter-on-quarter growth of 7 per cent three months earlier.

The bank said that the economy was still recovering despite the poor figures, largely thanks to private investment which rose 1.3 per cent quarter-on-quarter, up from 0.8 per cent in the previous period, a strong indication of improving domestic demand.

'Private spending in the third quarter hovered above the level before the crisis,' Kim Myung Kee, director general of the bank's economic statistics division, was quoted as saying by the Yonhap News Agency.

'If the economy does not post minus growth in the fourth quarter, the Korean economy is expected to grow around 6 per cent this year,' Kim said, in line with the bank's forecast of 5.9 per cent for the year.

South Korea's economy showed 7.6-per-cent growth over the first half of the year, but this was expected to slow for the second half, as the global recovery shows sign of slowing.

The strengthening of the won, which rose more than 5 per cent in value against the dollar in September alone, has threatened to put the brakes on the export-oriented economy.

A higher won makes South Korean goods less competitive abroad, and erodes revenues when they are repatriated.

But Kim said the impact of the currency's rise should not be overestimated. 'If the Korean won strengthens to the dollar in tandem with gains in other currencies, there is a low chance that the won's ascent would make a big dent in exports,' he said. dpa cd im