Economic Growth Hits 7-Year High in First Quarter

By Kim Jae-kyoung, Cho Jin-seo Staff Reporters The nation's economy grew at the fastest pace in more than seven years, in the first quarter of the year, with gross domestic product (GDP) expanding 7.8 percent compared to the same period a year ago, the Bank of Korea (BOK) said Tuesday. It was a surprisingly upbeat message from the central bank that the economy has recovered faster than predicted. It also shows that the economy's productivity has fully recovered to the pre-crisis level. Thanks to such robust growth, annual GDP will be able to grow by more than 5 percent from 2009, the finance ministry said after the BOK's report. GDP grew by 1.2 percent between the fourth quarter of 2009 and the first quarter of 2010, the report said. The figure is a standard measure of a country's economic output, and its growth rate is a barometer of its economic vibrancy. "The manufacturing sector rebounded, aided by the robust production of chips and other electronic goods. Consumer spending and facility investment maintained quarter-on-quarter growth," the bank said in a statement. It previously predicted a 7.5 percent year-on-year growth for the quarter. This will continue in the second half though the pace will slow, the Ministry of Strategy and Finance said. "Considering internal and external conditions, the economy will continue its stable growth after the second quarter and it won't be difficult to accomplish a 5-percent annual rise," the report said. "The world economy is continuing a faster-than-expected recovery. We expect consumption, employment and investment to keep rising as well globally." Some observers said the government should not get complacent. "It is encouraging to see some economic progress, but in my opinion the Korean economy is still performing below its potential," said James Rooney, CEO of Market Force Company, an investment advisor. "There are still too many people unemployed or underemployed, lots of space for rent, and many projects that are still not able to make progress." Despite the stellar performance in the first three months of the year, most economists agree that the growth will be, or should be slowing down for the rest of the year as the economy is becoming accustomed to the government's stimulus package. The possible raising of the interest rate by the central bank could throw cold water on this exuberance, says Oh Suk-tae, chief economist at SC First Bank. "The pace of growth should be slowed to around 1 percent quarter-on-quarter," he said. "I think that the Bank of Korea should start the rate hike in the near future, probably within the third quarter of this year." Kim Choong-soo, the central bank governor, has said he would consider raising the rate only after he is confident that the private sector is making a sustainable recovery.

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