South Korea’s GDP expands at faster pace

SEOUL: South Korea’s economy accelerated at a faster-than-expected pace in the first quarter on strong exports and capital investment, in a hopeful sign it will have enough buffers to counter a host of political and economic challenges in the months ahead.

The strong start to the year will be a relief for policymakers after months of downturn from a political crisis and as the country prepares to elect a new president in May amid rising tensions with neighbours North Korea and China.

Gross domestic product grew a seasonally adjusted 0.9% in the first quarter, the Bank of Korea said yesterday, accelerating from a 0.5% quarterly expansion in the final three months of last year.

It was the fastest pace since the second quarter of 2016 when the economy logged 0.9% growth. The median forecast in a Reuters survey was for a 0.7% expansion.

From a year earlier, GDP rose 2.7% in the first quarter, the fastest pace since 3.4% growth in the second quarter of 2016.

Facility investment led overall growth with a 4.3% gain on quarter, while exports gained 1.9% after declining 0.1% a quarter earlier.

Private consumption grew 0.4% from the previous quarter, accelerating from 0.2% in the last quarter of 2016.

Construction investment growth leapt 5.3% from three months earlier, as “apartment projects that boomed from a year earlier are still supporting economic growth,” a Finance Ministry official said after the data was published.

Intellectual property investment fell 0.2% on quarter.

“Drawing up an extra budget wouldn’t make sense anymore,” said Stephen Lee, chief economist at Meritz Securities in Seoul.

“We have to see who’ll become president, but I think it would be better to focus on spending on next year’s budget in order to improve the fundamentals of the economy.”

Asia’s fourth-largest economy will hold a presidential election on May 9 following the impeachment of ex-leader Park Geun-hye.

Leading democratic candidate Moon Jae-in has already promised an extra budget of at least 10 trillion won ($8.90 billion) although incumbent Finance Minister Yoo Il-ho said additional fiscal stimulus may not be necessary as the economy is improving.

The BoK upgraded its growth outlook to 2.6% for this year from 2.5% when it kept interest rates unchanged at a record low of 1.25% on April 13.

Governor Lee Ju-yeol then said better-thanexpected economic conditions from improving exports had brightened the outlook, but remained wary of geopolitical risks from North Korea.