S. Korean economy grows 6.2 pct in 2010

The South Korean economy grew 6.2 percent last year, the fastest expansion in eight years, as exports remained robust and facility investment jumped amid improved consumer spending, the central bank said Wednesday.

   The country's gross domestic product (GDP), the broadest measure of economic performance, was revised up from an earlier estimate of 6.1 percent for last year, according to the Bank of Korea (BOK). It marked the fastest growth since Asia's fourth-largest economy expanded 7.2 percent in 2002.

   The bank also raised economic growth in 2009 to 0.3 percent from its earlier projection of 0.2 percent.

   "Last year, the contribution of domestic demand to the growth sharply rose, pointing to self-sustaining recovery in the private sector," Kim Young-bae, director general of the BOK's economic statistics division, said at a press conference.

   The central bank said the growth of the Korean economy accelerated last year, helped by a sharp upturn in facilities investment, expanded exports and a pickup of growth in private consumption.

   In the fourth quarter, the Korean economy expanded 0.5 percent from three months earlier, matching an earlier estimate, but compared with a year earlier, it grew 4.7 percent in the final quarter of last year, less than a previous estimate of 4.8 percent.

   The quarterly growth has eased since the first quarter of 2010, but the central bank forecast that the economic growth rate is likely to accelerate to 1.3 percent in the first quarter of this year.

   The data came as economic uncertainties linger while inflationary pressure is growing, prompting Korean policymakers to face difficulties in adjusting the pace and the depth of policy normalization.

   A recovery in advanced economies, including the United States, is expected to serve as upside risks to economic growth, but the 9.0-magnitude earthquake and ensuing tsunami that devastated Japan on March 11 are widely viewed as adding to economic uncertainty.

   In South Korea, however, oil price gains and continued economic growth are exerting upward pressure on inflation. BOK Gov. Kim Choong-soo said keeping price stability is "the greatest challenge"

facing the economy as consumer prices will likely remain high for some time.

   The BOK has hiked the key rate in four steps to 3 percent since July last year from a record low of 2 percent.

   Exports of goods, which account for about 50 percent of the local economy, grew 15.8 percent last year, up from an earlier estimate of 14.1 percent. Private spending, one of the main growth engines of the Korean economy, expanded 4.1 percent in 2010, the same pace as earlier expected.

   Facility investment jumped 25 percent, better than an earlier

24.5 percent expansion, while construction investment declined 1.4 percent, better than an earlier estimate of a 2.3 percent contraction.

   The country's gross national income (GNI), reflecting the actual purchasing power of the population, rose 5.5 percent on-year in 2010, the fastest growth in eight years.

   Korea's GNI per capita stood at US$20,759 last year, up from

$17,193 the previous year, the central bank added. The GNI per capita surpassed the $20,000 mark for the first time since 2007 as the economy grew and the local currency rose against the U.S. dollar. The Korean won appreciated 2.62 percent to the dollar last year.

   "This year, the country's GNI per capita is likely to reach a record high, given growth projections and the trend of the won's gain to the greenback," Kim said.

   Last December, the BOK forecast that the Korean economy will likely expand 4.5 percent this year and inflation is expected to advance 3.5 percent. It will unveil revised economic outlooks next month.

   The central bank cited ongoing political unrest in the Middle East and North Africa and rises in oil and other commodity prices as downside risks. But recovery in the United States and other major economies is viewed as upside risks to growth, it added.

   The governor said that as the effects of the two risks are likely to be of "similar magnitude," the Korean economy is expected to grow around 4.5 percent as earlier estimated in 2011.