S.Korea’s GDP growth at 11-year high in 2021 as exports boom

S.Korea’s GDP growth at 11-year high in 2021 as exports boom

© Reuters. FILE PHOTO: A truck drives between shipping containers at a container terminal at Incheon port in Incheon, South Korea, May 26, 2016.REUTERS/Kim Hong-Ji TPX IMAGES OF THE DAY/File Photo

By Cynthia Kim

SEOUL (Reuters) – South Korea’s economy expanded at the fastest pace in 11 years in 2021 thanks to record exports, though a slowdown in capital investment cast a cloud over the outlook for growth this year.

Tuesday’s data from the Bank of Korea showed gross domestic product (GDP) expanded 4.0% in 2021, as demand for exports soared.

From the third quarter, the economy expanded a seasonally adjusted 1.1% in the October-December period, beating the 0.9% expansion tipped in a Reuters poll and up from a 0.3% rise in the third quarter.

Growth in annual terms in the fourth quarter was at 4.1%, also beating a median forecast of 3.7% in the poll.

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

“The economy got a boost from exports and investment in the final months of last year…Global demand for made-in-Korea will continue and consumption will improve on the back of expanded government spending to keep growth solid this year,” said Chun Kyu-yeon, an analyst at Hana Financial Investment.

South Korea’s economy has had a sharp albeit uneven bounce from the coronavirus slump in 2020 as exports expanded at their fastest annual pace in 11 years while the consumption recovery has been patchy due to social distancing curbs.

A recent Reuters poll of 20 economists forecast the economy to grow 2.9% this year, below the 3.0% projected by the BOK.

Tuesday’s data showed exports were the main driver of growth in the fourth quarter, jumping 4.3% on-quarter. Growth was also helped by private consumption and construction investment, which expanded 1.7% and 2.9%, respectively.

Capital investment declined 0.6% on-quarter following a 2.4% drop in the preceding three months.

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