South Korean Economy Grows

South Korea has the 13th largest economy in the world and is the third largest Asian economy behind China and Japan. Figures just released show that the economy has achieved its fastest rate of expansion for two years in Q1 2013. Growth came in at 0.9% for the first three months of the year, compared to the previous quarter, the Bank of Korea has revealed.

The figures also show that exports have enjoyed a turn-around with a 1.2% contraction in Q4 2012 being reversed to growth of 3.2% in the first quarter of this year. The overall growth has been spurred by improvements in the construction and investment sectors in addition to the improved export performance.

The export news is critical since exports contribute roughly half of the nation’s GDP. The decline seen recently had been blamed on softening demand in key markets such as the Eurozone and the USA, but the data for this quarter tend to imply that that situation has improved. It is just one more economic indicator which is contradictory in this phase of weak recovery from the global financial crisis.

The South Korean Won has appreciated by 10% over the past year against the US Dollar which makes South Korean exports costlier – on the other hand, Japan has seen a 20% depreciation against the Dollar in the same period giving it a financial advantage over competing South Korean goods. Time will tell if the rally in South Korean exports can be sustained.

In a bid to reduce the importance of exports, South Korea has put together a $15.3 billion stimulus package which is aimed to boost domestic consumption, create jobs and assist small to medium exporters. It is hoped that this will boost GDP by 0.3% and generate some 40000 jobs.