S. Korean economy grows 0.7 pct in Q3

SEOUL, Dec. 2 (Yonhap) -- South Korea's economic growth cooled down in the third quarter from three months earlier on eased growth in exports, but the economy is forecast to pull off a 6 percent expansion this year, the central bank said Thursday.

The country's gross domestic product (GDP), the broadest measure of economic performance, grew 0.7 percent in the July-September period, in line with an earlier estimate, according to the Bank of Korea (BOK).

But Asia's fourth-largest economy rose 4.4 percent from a year earlier in the cited period, less than an earlier estimate of a 4.5 percent on-year expansion.

The third-quarter quarterly growth decelerated from a 1.4 percent on-quarter expansion in the second quarter, indicating that the growth of the local economy slowed down following a fast recovery.

"The quarterly growth rate has been slowing since the first quarter, but this mainly resulted from a sharp expansion in the first half. The economic growth was led by private spending and investment, and the self-sustaining recovery by the private sector remains firm," Jung Yung-taek, head of the BOK's national accounts office, said at a press conference.

"In the fourth quarter, the Korean economy is expected to log positive quarterly growth, and for the full year, it could pull off 6 percent growth."

But Jung said in terms of real income, people did not feel the impact of the improving economy as the country's gross national income (GNI), reflecting the actual purchasing power of the population, grew at the slowest pace in 18 months in the third quarter.

The Korean economy expanded for the seventh straight quarter in the third quarter, aided by brisk exports and improved domestic demand, but the growth momentum has cooled down amid the flagging global economy.

The global economy is recovering at an uneven pace as emerging countries are concerned about risks of looming higher inflation while major advanced economies are cautious about still-high unemployment and risks of deflation.

The U.S. Federal Reserve pledged to pump an additional US$600 billion into the financial system in a bid to boost an anemic U.S. economy. But China is poised to take further steps, including a rate hike to curb inflationary pressures.

The data came as the BOK hiked the key interest rate by a quarter percentage point to 2.5 percent in November, following a three-month freeze, in a bid to curb mounting inflationary pressure. The central bank said the Korean economy is on a solid recovery track and the country's consumer inflation is expected to grow at about a 3 percent pace down the road.

Exports of goods, which account for about 50 percent of the local economy, grew 1.9 percent on-quarter in the third quarter, matching previous estimates. Private spending, one of the main growth engines of the Korean economy, expanded 1.3 percent, the same pace as earlier expected.

"The volume of private spending last quarter hovered above the pre-crisis level for the first time," Jung said.

Facility investment grew 5.5 percent, less than an earlier 6.3 percent advance, while construction investment gained 1.3 percent, lower than an estimate of a 1.5 percent expansion.

The central bank said the country's GNI, reflecting the actual purchasing power of the population, expanded 0.2 percent on-quarter in the third quarter, slowing from a 0.5 percent gain in the preceding quarter, due mainly to worsened terms of trade.

The third-quarter figure marked the slowest growth since a 0.7 percent contraction seen in the first quarter of 2009.

BOK Gov. Kim Choong-soo earlier said the Korean economy is likely to grow 6 percent this year thanks to resilient exports, slightly higher than the bank's earlier prediction of 5.9 percent. (Yonhap)