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S. Korean economy defies the recession

SOUTH Korea's economy recorded its strongest growth since 2003 in the second quarter as increased government spending and record low interest rates insulated it from the global recession.

Asia's fourth-largest economy expanded 2.3 percent in the three months to June 30, the Bank of Korea said yesterday.

South Korea joins Singapore and China among the Asian nations that have released stronger growth figures in recent weeks - another sign that the region is emerging from the world's worst downturn in decades.

There are doubts, however, whether South Korea and Asia's upturn will be sustained once the effects of government pump priming wear off.

Kang Chang-ku, an economist at the central bank, said the last time GDP grew more was in the fourth quarter of 2003 when it expanded 2.6 percent. The second-quarter figures are preliminary and may be revised.

The expansion marked the second straight quarter of growth for South Korea after a contraction in the last quarter of 2008. It eked out a 0.1 percent gain in the first quarter after a contraction of 5.1 percent in the previous quarter.

Singapore grew for the first time in a year, its economy surging an annualized 20 percent in the second quarter.

Kwon Goo-hoon, economist at Goldman Sachs in Seoul, said in a note that South Korea's growth was "driven by a good mix of strong fiscal stimulus, a weak KRW (South Korean won) and monetary easing."

In response to the global financial crisis last year and ensuing economic slowdown, the South Korean government increased spending to spur growth. The Bank of Korea, meanwhile, aggressively cut its key interest rate to a record low of 2 percent, where it has stayed for five months.

The central bank said manufacturing and exports helped boost growth. Manufacturing expanded 8.2 percent in the second quarter while exports grew 14.7 percent.


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