Bloomberg News

South Korea GDP Expands 0.8%, More Than Initially Estimated

December 07, 2011

(Updates with economist’s comment in fourth paragraph.)

Dec. 6 (Bloomberg) -- South Korea’s economy expanded more than the central bank initially estimated in the third quarter as exports of cars and metal products increased.

Gross domestic product grew 0.8 percent over the three months through September from the second quarter, compared with an October estimate of 0.7 percent, the Bank of Korea said in Seoul today. The economy expanded 3.5 percent from a year earlier, beating the bank’s October estimate of 3.4 percent.

Europe’s debt crisis has weighed on Asia’s growth, with China recording the weakest manufacturing since 2009 for last month. All nine economists surveyed by Bloomberg News expect the Bank of Korea to keep interest rates unchanged for a sixth straight month on Dec. 8, the longest pause since tightening began in July 2010.

“We expect the BOK to maintain a neutral policy stance at this week’s meeting, recognizing economic uncertainties while giving no indications of an imminent rate cut,” Ma Tieying, an economist with DBS Bank Ltd. in Singapore, said before the release. “Although economic growth is slowing in Korea, the risk of a recession remains low.”

The won advanced 0.1 percent to close at 1,129.80 in Seoul yesterday, according to data compiled by Bloomberg. The benchmark Kospi stock index gained 0.4 percent.

Goods exports increased 1.6 percent in the third quarter from the previous quarter, today’s report showed. Private consumption gained 0.4 percent and government spending rose 1.4 percent.

Exports Drive Economy

Overseas shipments continue to drive the economy, expanding a more-than-expected 13.8 percent in November, according to government data released Dec. 1. Meanwhile, industrial production unexpectedly fell 0.7 percent in October from September, the fifth decline this year.

The Bank of Korea may lower its growth outlook for this year and next due to the global economic slowdown when it revises its forecasts this week, Lee Jong Kyu, deputy director- general at the Economic Research Institute at the Bank of Korea, said in an interview in Bali on Dec. 2.

South Korea’s economy will grow by 3.8 percent in 2012, the Organization for Economic Cooperation and Development forecast last week. That’s lower than the Bank of Korea’s projection in July that the economy would expand by 4.6 percent next year.

--With assistance from Sarina Yoo in Seoul. Editors: Ken McCallum, Iain Wilson

To contact the reporter on this story: Eunkyung Seo in Seoul at eseo3@bloomberg.net

To contact the editor responsible for this story: Ken McCallum at kmccallum4@bloomberg.net


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