South Korea’s economy expanded at the fastest pace in 11 years in 2021 thanks to a jump in exports and construction activity, tempering declines in capital investment and a slow recovery in the coronavirus-hit service sectors.
Bank of Korea (BOK) data on Tuesday showed gross domestic product (GDP) expanded 4 percent in 2021, as demand for exports soared.
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The BOK expects GDP to grow 3 percent this year as Asia’s fourth-largest economy benefits from strength in computer chips exports and increased public spending, though record local 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.”
From the third quarter, the economy expanded a seasonally adjusted 1.1 percent in the October-December period, beating the 0.9 percent expansion tipped in a Reuters poll and up from a 0.3 percent rise in the third quarter.
Growth in annual terms in the fourth quarter was at 4.1 percent, also beating a median forecast of 3.7 percent in the poll.
The BOK on January 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 coronavirus slump in 2020 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.
A recent Reuters poll of 20 economists forecast the economy to grow 2.9 percent this year, below the 3.0 percent projected by the BOK.
Tuesday’s data showed exports were the main driver of growth in the fourth quarter, jumping 4.3 percent on quarter.
Growth was also helped by private consumption and construction investment, which expanded 1.7 percent and 2.9 percent, respectively.
The service sector grew 1.3 percent in the fourth quarter, stronger than the third quarter but slower than the second.
Capital investment declined 0.6 percent on quarter, following a 2.4 percent drop in the preceding three months.