Industrial output grows by most in 11 years in 2021

South Korea's industrial output increased by the most in 11 years in 2021 due largely to a low base effect and robust exports, data showed Friday, in a sign that the country's economy has extended recovery momentum.

Industrial output increased 4.8 percent in 2021 from the previous year, a turnaround from a 1.2 percent on-year fall in 2020, according to the data compiled by Statistics Korea.

It marked the largest growth since 2010, when industrial output gained 6.5 percent.

Service output, once battered by the COVID-19 pandemic, rose 4.3 percent on-year, the fastest growth in 14 years.

Asia's fourth-largest economy grew 4 percent last year, the fastest growth in 11 years, on the back of robust exports of chips and autos. The South Korean economy contracted 0.9 percent in 2020.

Retail sales, a gauge of private spending, increased 5.5 percent last year, a turnaround from a 0.2 percent on-year fall in 2020, as economic activity increased amid the vaccine rollout. It also marked the fastest on-year gain in 11 years.

Facility investment expanded 9 percent in 2021 from the previous year, the steepest on-year rise in four years and accelerating from a 6 percent on-year gain in 2020.

It marked the first time since 2017 that production, consumption and investment increased all together.

Finance Minister Hong Nam-ki said the data reaffirmed the Korean economy's fast and strong recovery.

The statistics agency said last year's industrial output remained solid even compared with the pre-pandemic year of 2019.

"It was more than the base effect. Economic recovery momentum was strong," Eo Woon-sun, a senior Statistics Korea official, told reporters.

In December last year, industrial output rose 1.8 percent from the previous month, accelerating from a 3.3 percent on-month gain in November.

Output in the mining, manufacturing, gas and electricity industries grew 4.3 percent on-month on the back of robust manufacturing production. But service output fell 0.4 percent, led by faltering production in the accommodations and eatery segments.

Retail sales grew 2 percent on-month in December, while facility investment fell 0.4 percent from a month earlier.

Despite the overall recovery, the South Korean economy faces growing downside risks as the latest upsurge in COVID-19 cases and the spread of the omicron variant are casting a cloud over the recovery of private spending.

External economic risks also heightened due to increased tensions between Russia and Ukraine and the prospect that the Federal Reserve is likely to accelerate its monetary tightening.

South Korea's daily virus cases surged to a record high of 16,096 Friday as the highly contagious omicron variant is fast spreading across the nation. Omicron became the dominant strain here last week.South Korea's exports, which account for half of the economy, rose 22 percent on-year in the first 20 days of January on the back of solid demand for chips and petroleum products. For all of 2021, exports gained 25.8 percent on-year to hit a record high of $644.5 billion.

Private spending grew 1.7 percent in the fourth quarter from three months ago, a turnaround from a 0.2 percent on-quarter fall in the third quarter, according to central bank data.

The government proposed another extra budget of 14 trillion won ($11.7 billion) last week to support small merchants hit hard by the COVID-19 pandemic amid extended virus curbs.

Last week, the government raised the limit on the size of private gatherings to six from the previous four. But it extended a 9 p.m. curfew on restaurants and cafes, which has been in place since mid-December, for another three weeks until Feb. 6.