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SKorean economy shrinks 4.3 percent in 1st quarter
11:02
South Korea's economy contracted 4.3 percent in the first quarter of 2009 from the same period last year, as manufacturing and exports slumped amid the global downturn, the Bank of Korea announced Friday.
That marks the second straight quarter that South Korea's economy grew smaller. Gross domestic product shrank 3.4 percent in the fourth quarter of 2008 in the first year-on-year contraction in a decade.
Still, the economy managed to grow marginally in the first quarter compared with the fourth, on the back of government stimulus efforts, suggesting that conditions may be improving.
South Korea is battling its worst downturn since the Asian economic crisis of 1997-98 as exports and industrial production have wilted in the face of slowing global demand.
Both the government and central bank forecast that Asia's fourth-largest economy will contract on an annual basis in 2009 for the first time since 1998.
The government has responded to the slump and rising unemployment by offering stimulus programs, including a 28.9 trillion won, or $21.6 billion, supplementary budget announced last month. The Bank of Korea, meanwhile, has slashed its benchmark interest rate six times since October to a record low 2 percent to spur growth.
Manufacturing and exports both slumped during the first quarter, which covers the three months ended March 31. Manufacturing contracted 13.5 percent while exports shrank 14.1 percent.
The economy, however, grew 0.1 percent in the first quarter from the final three months of last year, when GDP shrank 5.1 percent.
Lim Ji-won, economist at JP Morgan in Seoul, said that the quarter-on-quarter gain was mostly due to the "public sector's role," adding that the government's attempt to boost the economy was paying off.
The government "actually frontloaded 2009 fiscal spending in the first half and mostly in the first quarter," she said.
The 0.1 percent growth figure equates to an annualized expansion of 0.2 percent, she said. The central bank does not provide an annualized number.
She also said that though manufacturing continued to suffer quarter on quarter, the drop had eased.
"The pace of contraction has decreased quite significantly," she said.
South Korea's economy grew 2.2 percent in 2008, the worst performance since an annual contraction of 6.9 percent in 1998.
Both the government and central bank are forecasting the economy will contract on an annual basis in 2009, though expect it will rebound and grow again in 2010.
