S. Korean economy grows 2.3 pct in Q2

By Kim Soo-yeon
SEOUL, July 24 (Yonhap) -- The South Korean economy grew at the fastest pace in
more than five years in the second quarter as economic stimulus packages helped
boost domestic demand and exports rose, the central bank said Friday.

The country's gross domestic product (GDP), the broadest measure of economic
performance, expanded 2.3 percent in the April-June period from three months
earlier, sharply up from a 0.1 percent advance in the first quarter, according to
an advance estimate by the Bank of Korea (BOK).
The second-quarter reading matched a BOK prediction made in early July and marked
the fastest growth since a 2.6 percent gain in the fourth quarter of 2003.
Compared with a year earlier, however, the economy shrank 2.5 percent, easing
from a 4.2 percent on-year contraction in the first quarter.
"Exports of goods sharply rebounded and domestic demand picked up in the second
quarter," the BOK said in a statement.
The government and the BOK have been scrambling to bolster the slumping economy
by implementing large scale fiscal spending and aggressively cutting the key
interest rate. In April, the parliament approved a 28.4 trillion won (US$22.7
billion) extra budget aimed at generating jobs and boosting domestic demand.
The second-quarter expansion is underpinning optimism that the Korean economy
might have passed its worst downturn in more than a decade, and indication of its
resilience.
But the government and the central bank have cast cautious views about the pace
of recovery, saying the economic outlook still remains murky as rising oil prices
and a protracted slump in the global economy would serve as downside risks to
growth.
Exports, which account for about 60 percent of South Korea's GDP, jumped 14.7
percent on-quarter in the three months ended June 30, after declining 3.4 percent
in the first quarter.
Private spending, one of the main growth engines of the Korean economy, gained
3.3 percent, compared with a 0.4 percent gain in the preceding quarter.
Facility investment climbed 8.4 percent after falling 11.2 percent three months
earlier, and construction investment rose 0.4 percent, compared with a 5.2
percent expansion in the first three months of this year.
Despite the upbeat readings, analysts say the BOK is expected to keep the key
rate frozen throughout the year as a hasty shift into a tightening monetary
stance would hamper a nascent economic recovery.
After freezing the rate for five months in a row, BOK Gov. Lee Seong-tae said in
early July that the central bank will maintain its accommodative monetary policy
for the time being.
The government has reiterated that it will stick to its "expansionary" economic
policy, and that it is premature to say that the economy is making a full
recovery.
The BOK slashed the rate by a total of 3.25 percentage points to a record low of
2 percent between October and February in an effort to boost the sagging economy.
sooyeon@yna.co.kr
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