South Korea growth picks up from slowest pace since 2009

SEOUL (Bloomberg) - South Korea's growth picked up in the first quarter of this year from the previous three months, when the economy expanded at the slowest pace since 2009.

Gross domestic product rose 0.8 per cent from the previous quarter, the Bank of Korea said Thursday, versus the median estimate of economists surveyed by Bloomberg for a 0.6 per cent expansion. From a year earlier, the economy grew 2.4 per cent.

The central bank cut its GDP forecast for this year to 3.1 per cent as Governor Lee Ju Yeol waits for the benefits of three interest-rate cuts since August to support growth. Finance Minister Choi Kyung Hwan told parliament this week that the government will consider action to boost growth if necessary in the second half of the year.

"The expansion in the fourth quarter was bad, so higher GDP growth data this time can't be seen as a steady recovery," Lee Sang Jae, an economist at Eugene Investment & Securities Co. in Seoul, said before the release. "The BOK might consider another rate cut in the coming months if it sees risks to its 2015 growth outlook."

The central bank held its key interest rate at a record low of 1.75 per cent in April, following a 25 basis points reduction the previous month. Economists are split over the odds of another move this year, with 12 out of 27 analysts surveyed by Bloomberg in April forecasting a cut to 1.5 per cent, while 14 forecast no change. One economist predicts an increase to 2 per cent.

South Korea's won appreciated 3.2 per cent this month to 1,079.59 per dollar at the close on Wednesday. The currency gained 4.6 per cent versus the euro and 3.4 per cent against the yen during the same period, according to data compiled by Bloomberg.

Exports by Asia's fourth-biggest economy will decline for some time as the negative impact of cheaper oil, such as dropping prices for oil-related products, will outweigh the positive effects, the trade ministry said April 15. Overseas sales fell in each of the first three months of this year.

The central bank estimates the government will have a tax revenue shortfall of 6 trillion won this year, and sees risk to its growth outlook if the gap is larger than that, BOK research chief Chang Min said on April 9.