SEOUL (Parliament Politics Magazine): In 2021, South Korea’s economy grew at its strongest rate in 11 years, owing to increases in construction activity and exports, which offset decreases in capital investment and a delayed recovery in the coronavirus-affected service sectors.
According to data released by the Bank of Korea (BOK) on Tuesday, the country’s gross domestic product (GDP) increased by 4% in 2021, owing to a surge in export demand.
The BOK anticipates GDP to climb 3% this year as the fourth-largest economy in Asia benefits from strong computer chip exports and higher government investment, however record local COVID-19 cases this week threaten consumption.
The head of BOK’s Economics Statistics department, Hwang Sang-pil said, “Global demand for our chips is resilient and strong exports will keep [South Korea’s] growth momentum solid.”
People are becoming accustomed to social distancing restrictions. The pace of activity slowed in December, but the impact was less than in previous months.
In the period from October to December, the economy grew a seasonally adjusted 1.1 percent, topping the 0.9 percent expansion predicted in a Reuters poll and up from a 0.3 percent increase in the third quarter.
In annual terms, growth was 4.1 percent in the fourth quarter, exceeding the poll’s median prediction of 3.7 percent.
The BOK hiked its benchmark interest rate to the levels prevailing before the pandemic on January 14 and hinted that it would tighten further if inflationary and growth pressures continue to be robust.
Uneven Jump
South Korea’s economy has rebounded strongly, albeit unevenly, from the Covid-19 crisis in 2020, with exports growing at their quickest annual rate in 11 years last year, while spending has been inconsistent because of social distancing restrictions.
According to a recent Reuters poll of 20 analysts, the economy will grow by 2.9 percent this year, down from the BOK’s prediction of 3.0 percent.
In the fourth quarter, exports were the key engine of growth , up 4.3 percent year over year, according to figures released Tuesday.
Private consumption and building investment both increased by 1.7 percent and 2.9 percent, respectively, boosting growth.
In the fourth quarter, the service sector’s growth was 1.3 percent, faster in comparison to the third quarter, however, slower than the second.
Following a 2.4 percent dip in the previous three months, capital investment fell 0.6 percent quarter over quarter.