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Korea's Economic Growth Hits 2-Year High in Q1

The South Korean economy grew at its fastest quarterly pace in two years in the first quarter as exports gained ground weathering the yen's weakness to the local currency, the central bank said Thursday.

Korea's gross domestic product (GDP), the broadest measure of economic performance, grew 0.9 percent in the first quarter from three months earlier, quickening from 0.3 percent on-quarter growth in the fourth quarter of 2012, according to an advance estimate by the Bank of Korea (BOK).

The first-quarter growth marked the fastest gain since the 1.3 percent growth in the first quarter of 2011. It also surpassed the BOK's earlier projection of 0.8 percent growth.

From a year earlier, GDP grew 1.5 percent in the first quarter after advancing an identical 1.5 percent in the fourth quarter of last year.

The quarterly growth pace accelerated for the third straight quarter in the first quarter after the local economy posted no growth in the third quarter.

A better-than-expected growth figure comes even as the Japanese currency's weakening trend threatens to crimp Korea's exports.

The yen's weakness raises concerns for Seoul's exports as it makes prices of Korean products more expensive in overseas markets, compared with those of Japanese rivals. The Korean won appreciated 4.7 percent to the yen on-quarter in the first quarter.

The BOK recently revised down its 2013 growth outlook to 2.6 percent from the previous 2.8 percent, but its outlook remained higher than the government's 2.3 percent growth estimate.

Despite the outlook downgrade, the BOK froze the key interest rate at 2.75 percent for the sixth straight month in April, resisting the government's pressure to lower the rate.

The government proposed an extra budget worth 17.3 trillion won (US$15.5 billion) to spur growth while it is pushing to frontload more than 60 percent of fiscal spending in the first half of this year.

Analysts are divided over the BOK's next move, but more experts cautiously expect that the BOK is likely to leave the key rate unchanged throughout this year.

Exports, which account for around 50 percent of the GDP, gained 3.2 percent on-quarter in the January-March period after declining 1.1 percent in the fourth quarter, the BOK said.

Private spending contracted 0.3 percent on-quarter in the first quarter, compared with the 0.8 percent on-quarter gain in the preceding quarter.

Facility investment grew 3 percent last quarter after falling 1.8 percent in the fourth quarter and construction investment advanced 2.5 percent, a turnaround from a 1.2 percent decline in the previous quarter.

Source Text

Source: Yonhap News (Apr. 25, 2013)

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