South Korea’s GDP growth is 11-year high in 2021 as exports rise Reuters

Author: Cynthia Kim

SEOUL (Reuters) – South Korea’s economy is booming at the fastest pace in 1121 in 2021, driven by rising exports and construction activity, a slowdown in capital investment and a slow recovery in the coronavirus service sector.

Bank of Korea data on Tuesday showed a 4.0% increase in gross domestic product (GDP) in 2021 as export demand rose.

BOK expects GDP to grow by 3.0% this year as Asia’s fourth-largest economy benefits from strong chip exports and rising public spending, despite a record-breaking local COVID-19 case this week.

“The global demand for our chips is resilient and strong (South Korean) exports will maintain a strong growth momentum,” said Hwang Sang-pil, head of BOK’s Department of Economic Statistics.

“People are getting used to the restrictions on social distance … Activity was slower in December, but the impact is smaller than before.”

From the third quarter onwards, the seasonally adjusted economy grew by 1.1% from October to December, exceeding the 0.9% increase forecast by a Reuters poll and the 0.3% increase in the third quarter.

In the fourth quarter, year-on-year growth was 4.1%, well above the median forecast of 3.7% in the survey.

The BOK raised its benchmark interest rate on January 14 to pre-pandemic levels and said it could tighten further as growth and inflationary pressures remain strong.

The South Korean economy has experienced a sharp rebound in the decline of the coronavirus in 2020, with exports expanding at the fastest pace in 11 years last year and a slight recovery in consumption as a result of the decline in social exclusion.

A recent survey of 20 economists by Reuters predicts that the economy will grow by 2.9% this year, below the 3.0% forecast by BOK.

Tuesday’s data show that exports were the main driver of growth in the fourth quarter, with a 4.3% jump in the quarter.

Growth was also supported by private consumption and investment in construction, which rose by 1.7% and 2.9%, respectively.

The services sector grew by 1.3% in the fourth quarter, which was stronger than in the third quarter but slower than in the second.

Capital investment fell by 0.6% in the quarter, after falling by 2.4% in the previous three months.