South Korea’s economy grows by 0.4%

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BankofKorea A man gets on a bicycle in front of the Bank of Korea in Seoul.

Seoul - South Korea's economy picked up speed slightly in the final quarter of 2012 but fell short of forecasts, as a persisting dip in capital investment and lower export tempered growth.

Bank of Korea said Thursday that South Korea's economy expanded 0.4 percent from the previous quarter in the three months ending in December, falling short of the bank's October forecast of 0.8 percent growth.

The advanced estimate was a moderate improvement from the third quarter's 0.1 percent growth, the slowest pace in more than three years. Over a year earlier, the economy grew 1.5 percent, the same pace in the previous quarter.

For full-year 2012, Asia's fourth-largest economy grew 2 percent over 2011, the weakest annual performance in three years.

The slow annual growth was attributed to a drop in corporate investment and weak growth in exports, which offset the government's increased public construction projects and welfare spending. The government spending added 0.6 percentage points to the 2012 annual growth, according to the central bank.

The bank said an improvement in the fourth-quarter growth was due to the smaller decline in capital investment and a modest rise in consumer spending.

But the fragile recovery means it is too early to say the economy hit the bottom in the third quarter, said Bank of Korea director-general Kim Young-bae.

South Korea's economy is forecast to expand 2.8 percent in 2013, Bank of Korea said on Jan. 11, revising down its October forecast of 3.2 percent citing the uncertain overseas demand.

Despite grim outlook of the economy, Bank of Korea kept the key policy rate steady at 2.75 percent for a third month in January.

The government of Park Geun-hye, the president elect who is taking office in February, is planning to spend about 70 percent of the government's annual budget during the first half of this year to aid the recovery. - Sapa-AP

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