SOUTH KOREA: End of economic crisis signalled By John Burton in Seoul
The South Korean economy grew by 12.3 per cent in the third quarter, the fastest growth rate since 1988, in apparent confirmation that the nation's two-year economic crisis is over.
Gross domestic product, which fell by 5.8 per cent last year, now exceeds the level at which Korea's foreign debt crisis erupted in November 1997, the Korean central bank said yesterday. Growth for the full year is predicted to be at least 9 per cent.
The third quarter was little affected by the near collapse in July of Daewoo, the nation's second largest chaebol, despite fears that the group's $74bn debt burden would destabilise the financial sector and slow economic growth.
Daewoo, which has products ranging from cars to ships, is being dismembered by creditor banks as part of a debt restructuring programme.
The economic rebound was the result of strong exports, particularly of electronics products such as semi-conductors, and a resulting increase in investments. Analysts believe Korea's recovery is sustainable if global demand remains buoyant.
The latest figures were released almost two years to the day after Korea asked for a $58bn bail-out from the International Monetary Fund when it was in danger of defaulting on foreign borrowings.
The central bank noted, however, that the third quarter growth rate appeared particularly large because it compared with a contraction of 7.1 per cent in the corresponding quarter last year.
Exports climbed 22 per cent from a year ago, while industrial investments soared by 48 per cent. Personal consumption rose by 10 per cent.
Citibank in Seoul said growth in the fourth quarter could reach 16 per cent, which would be the biggest jump since the 15.9 per cent rate recorded in the first quarter of 1988 when Korea was preparing for the Olympic Games.
Although some analysts expect growth to slow to 4-6 per cent next year as the government reduces the deficit spending that helped spark the recovery, others believe the growth rate could be more robust.
"Personal consumption and industrial investments are likely to be higher next year and I don't expect the growth rate to fall off sharply, unless there is an unexpected change in global conditions," said Geoffrey Barker, chief economist at Dresdner Kleinwort Benson in Hong Kong.
The rapid growth rate has raised concerns about inflationary pressure next year.