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South Korea economic growth hits two-year high | South Korea economic growth hits two-year high |
(35 minutes later) | |
South Korea's growth rate hit a two-year high in the first three months of the year, boosted by a rebound in construction, investment and exports. | South Korea's growth rate hit a two-year high in the first three months of the year, boosted by a rebound in construction, investment and exports. |
The economy grew by 0.9% in the January to March quarter from the previous three months, the central bank's estimates showed. | The economy grew by 0.9% in the January to March quarter from the previous three months, the central bank's estimates showed. |
The data is likely to help allay fears over the health of the Korean economy. | The data is likely to help allay fears over the health of the Korean economy. |
Earlier this year, the government cut its growth forecast for the current year amid a slowdown in exports. | Earlier this year, the government cut its growth forecast for the current year amid a slowdown in exports. |
However, the latest data showed a 3.2% quarter-on-quarter growth in exports during the period. | However, the latest data showed a 3.2% quarter-on-quarter growth in exports during the period. |
That compares with a 1.2% drop in the previous quarter. | That compares with a 1.2% drop in the previous quarter. |
'Still panicking' | 'Still panicking' |
South Korea's exports, which account for almost half of its overall output, have been hit by slowing demand in key markets such as the US and the eurozone. | South Korea's exports, which account for almost half of its overall output, have been hit by slowing demand in key markets such as the US and the eurozone. |
Demand in the eurozone has been hurt by the bloc's ongoing sovereign debt crisis, while the US economic recovery has also been fragile. | Demand in the eurozone has been hurt by the bloc's ongoing sovereign debt crisis, while the US economic recovery has also been fragile. |
Some analysts warned that despite the positive data, exports continue to be fragile as conditions in those markets have not improved substantially. | Some analysts warned that despite the positive data, exports continue to be fragile as conditions in those markets have not improved substantially. |
"I think it's hard to say that the economy is turning around as export growth completely halted," said Jun Min-Kyoo, an economist at Korea Investment and Securities. | "I think it's hard to say that the economy is turning around as export growth completely halted," said Jun Min-Kyoo, an economist at Korea Investment and Securities. |
"Companies are still panicking about poor exports." | "Companies are still panicking about poor exports." |
There have also been fears over the impact movements in the currency markets may have on Korean exports. | |
The South Korean won has risen by nearly 10% against the US dollar since May, making its exports more expensive to foreign buyers. | |
Meanwhile, there has been a sharp decline in the Japanese yen, which has dipped almost 20% against the US dollar since November last year, triggered by an aggressive monetary policy stance by the new Japanese government. | |
There have been fears that because Japan and South Korea compete in similar markets, Korean goods may lose out as a result of the currency moves and that such developments may also hurt South Korea's overall growth. | |
However, analysts said the latest data indicated that the moves had not had a significant affect on the sector. | |
"Exports improved even though the yen was depreciating, suggesting that there hasn't been any major impact on growth yet," said Kong Dong-Pak, an analyst at Hanwha Securities. | |
Raise forecast? | Raise forecast? |
As a result, policymakers have been taking measures to boost domestic consumption in an attempt to offset the decline in foreign sales and sustain growth. | As a result, policymakers have been taking measures to boost domestic consumption in an attempt to offset the decline in foreign sales and sustain growth. |
Last week, the government unveiled a 17.3tn won ($15.3bn; £9.2bn) stimulus plan. | Last week, the government unveiled a 17.3tn won ($15.3bn; £9.2bn) stimulus plan. |
It said the funds would be used to help small and medium-sized exporters, create jobs, boost a stagnant property market and cover a shortfall in tax revenue. | It said the funds would be used to help small and medium-sized exporters, create jobs, boost a stagnant property market and cover a shortfall in tax revenue. |
The move is expected to help boost annual growth by 0.3 percentage point this year and create 40,000 jobs. | The move is expected to help boost annual growth by 0.3 percentage point this year and create 40,000 jobs. |
Analysts said that as the plan is implemented and starts to impact real growth, policymakers may revise their projections upwards. | Analysts said that as the plan is implemented and starts to impact real growth, policymakers may revise their projections upwards. |
"Once the government's extra budget starts kicking in, it's possible that the Bank of Korea could raise its 2013 growth forecast come July," said Mr Kong of Hanwha Securities. |
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