South Korea’s GDP growth climbs to 11-year high, but recovery uneven
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South Korea's economy grew 4 per cent for 2021.
PHOTO: REUTERS
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SEOUL (REUTERS, BLOOMBERG) - South Korea’s economy expanded at the fastest pace in 11 years in 2021 helped by a jump in exports and construction activity, tempering declines in capital investment and a slow recovery in the coronavirus-hit service sectors
Record exports drove the rebound but swathes of the economy have fallen behind. Jobs are still vanishing across manufacturing and service sectors, a reminder that President Moon Jae-in’s promises to boost employment have not materialised.
Hours after Bank of Korea data showed the economy expanded 4 per cent last year, hundreds of small business owners plan to gather near the National Assembly in Seoul to shave their heads in protest against social distancing rules that have hammered retail and service sector sales.
The government last week unveiled plans for a 14 trillion won (S$15.75 billion) extra budget to help smaller businesses get through the latest virus wave. Both the main candidates in March’s presidential election have called for even more spending support to shore up the recovery in light of renewed restrictions.
The BOK expects GDP to grow 3 per cent this year as Asia’s fourth-largest economy benefits from strength in semiconductor exports and increased public spending, though record domestic Covid-19 cases this week are a threat to consumption.
“Global demand for our chips is resilient and strong exports will keep (South Korea’s) growth momentum solid,” said Hwang Sang-pil, head of BOK’s Economics Statistics department.
“People are getting used to social distancing curbs. Activity was slower in December but the hit is smaller than before.”
The economy expanded a seasonally adjusted 1.1 per cent in the October-December period from three months earlier, beating the 0.9 per cent expansion tipped in a Reuters poll and up from a 0.3 per cent rise in the third quarter.
From a year earlier, the economy expanded 4.1 per cent in the fourth quarter, also beating a median forecast of 3.7 per cent 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.
South Korea’s economy has had a sharp albeit uneven bounce from the Covid-19 slump in 2020, when it contracted 0.9 per cent, with exports expanding at their fastest annual pace in 11 years last year while the consumption recovery has been patchy due to social distancing curbs.
