Published : 2013-01-24 09:20
Updated : 2013-01-24 18:06
Korea’s economy grew by 2 percent in 2012, the slowest in three years, due to low consumption and a sharp decline in facility investment stemming from the global economic slowdown, the Bank of Korea said Thursday.
The actual growth rate of the nation’s gross domestic product is lower than the initial forecast of 2.4 percent made in October 2012, and the lowest since 2009 when growth expanded by just 0.3 percent during the global financial crisis. The BOK said the GDP grew 0.4 percent in the fourth quarter.
The annual growth of Korea’s GDP, the broadest measure of economic performance, then rebounded by 6.3 percent in 2010, and 3.6 percent in 2011.
“The growth rates of exports and private consumption declined compared to the year before while facilities investment shifted to negative growth and construction investment continued its sluggishness,” BOK said in a statement.
Facilities investment slipped into negative territory of minus 1.8 percent, while investment in the construction sector saw minus 1.5 percent growth.
Meanwhile, exports of goods and services increased 3.7 percent in 2012, down from 9.5 percent a year earlier, and private consumption grew a mere 1.8 percent, down from 2.3 percent in 2011, the central bank noted.
Trade remained Korea’s biggest source of growth, followed by state and private consumption and facility investment.
Manufacturing growth also slowed to 2.2 percent from 7.2 percent on lower domestic demand and exports, but services, including retail, telecommunications and education, maintained similar growth from last year at 2.4 percent. The services sector saw 2.6 percent growth in 2011.
The central bank expects Korea’s overall growth to reach 2.8 percent in 2013, lower than the International Monetary Fund’s forecast, as the global economic slowdown will weigh down exports, Korea’s main driver of growth.
Also, the appreciation of the won, driven by monetary easing in advanced economies of the U.S. and Japan, is likely to affect Korean goods abroad.
The Korean government has indicated that it will make a currency intervention to stabilize the volatility in the foreign exchange market.
Analysts suggest that the country could step in when the won-dollar rate hits 1,050 won, as a stronger won would weaken the price competitiveness of Korean products overseas, compared with Japan, the country’s biggest rival in automobiles and IT.
China, Korea’s top export destination, is expected to maintain its growth rate at above 8 percent, but uncertainties remain for Korean exporters as the world’s second-largest economy seeks to boost private consumption while giving more benefits to domestic manufacturers.
By Park Hyong-ki