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By Kim Jae-kyoung The economy has shown clear signs of slowdown, with the nation’s gross domestic product (GDP) growing at the slowest pace in one and a half years in the third quarter due to the waning effect of economic stimulus and weak manufacturing sector. The Bank of Korea (BOK) reported Thursday that the GDP growth slowed to 0.7 percent in the third quarter from a quarter ago, compared to the previous quarter’s 1.4 percent expansion. The GDP grew 2.1 percent in the first quarter. On a year-on-year basis, the economy expanded 4.4 percent between July and September, compared to the second quarter’s 7.2 percent growth. “The economic growth has been slowing since the first quarter, but this mainly resulted from a sharp expansion in the first half. The economic growth was led by private spending and investment, and the self-sustaining recovery by the private sector remains firm,” BOK senior economist Jung Yung-taek, said at a press conference. “In the fourth quarter, the Korean economy is expected to log positive quarterly growth, and for the full year, it could pull off 6 percent in growth.” Despite the central bank’s upbeat outlook, Asia’s fourth largest economy is likely to lose steam in the coming quarters, with a series of key economic data signaling a downturn. According to the National Statistic Office, the Industrial Production Index decreased by 4.2 percent in October, which was the largest drop in 22 months. The Composite Leading Index, which predicts future growth, also decreased by 0.7 percent. Manufacturers’ business confidence also fell to the lowest level in 11 months for December. The index of manufacturers’ outlook on business conditions reached 91 for December, down from 92 for November, according to the Bank of Korea (BOK) “The third-quarter growth was slow for which I blame the manufacturing sector. There was an export-led slowdown in industrial output growth in the third quarter, which I think emanated from China,” ING Group senior economist Tim Condon told The Korea Times. “I am hopeful that China’s November purchasing managers’ index (PMI) data signals an end to the growth soft patch in China. I remain of the view that trend growth in Korea is 1.2 percent quarter-on-quarter and 4.7% annually,” he added. Nomura Securities economist Kwon Young-sun forecast that the quarter-on-quarter economic growth will turn negative in the fourth quarter, citing rising inventory and lingering uncertainties. “We are particularly concerned about the higher inventory-to-shipment ratio and firms expecting an even higher inventory burden for the rest of this year. The BOK rate hike in November is adding downside risks to growth,” he said. “In addition, uncertainty over capital control measures and elevated geopolitical risks are likely to mean more financial market volatility, which could also add downside risk to growth, especially in business investment,” he added. “We believe that negative growth in the fourth quarter looks inevitable and therefore 2010 annual GDP growth should fall below 6 percent.” In the meantime, the central bank said the country’s gross national income (GNI), reflecting the actual purchasing power of the population, expanded 0.2 percent on-quarter in the third quarter, slowing from a 0.5 percent gain in the preceding quarter, due mainly to the worsened terms of trade. | |
kjk@koreatimes.co.kr |
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Friday, December 3, 2010
Korea’s GDP growth slows to 0.7%
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