South Korea GDP Growth Q4 2007

South Korea’s economy grew faster than expected in the final quarter of 2007, driven by increased corporate investment and a recovery in domestic consumption, the Bank of Korea said today. Korea's gross domestic product rose a seasonably adjusted 1.5 per cent in the October-December period, Up from 1.3 per cent in the previous quarter.The economy expanded 5.5 per cent from a year earlier, the fastest pace in almost two years.

The robust growth was propelled by stronger corporate spending with corporate investment in factories surging 4.4 per cent in the last quarter, reversing the third quarter’s drop. Increasing consumption also contributed to economic growth with private consumption rising 1.1 per cent.

Exports remained resilient in the final three months of 2007 thanks to strong demand from China. Exports jumped 7.3 per cent, accelerating from a 1.5 per cent growth in the third quarter. It was the biggest increase since the final quarter of 2003.

Shipments to China, South Korea’s biggest export market, soared 18 per cent from January 1 to December 20 and exports to the Middle East jumped almost 40 per cent.

The central bank is likely to come under growing pressure to cut interest rates as higher oil prices and grwoing problems in the US economy and Europe are expected to threaten export growth. The principal problem is that the bank has little room to cut interest rates due to rising inflation.

The central bank has forecast that growth in Asia’s third-largest economy will slow to 4.7 per cent this year, much lower than President-elect Lee Myung-bak’s growth target of 6 per cent. The economy expanded 4.9 per cent last year from the previous year’s 5.0 per cent growth.