South Korea Posts Fastest Economic Growth in Nearly Three Years

South Korea is the fourth largest economy in Asia. After getting affected by the Asian economic crisis in 2008 the country has posted its fastest growth in nearly three years for the last quarter of 2013. It is on track, according to financial analysts, in recovering from an economic slowdown, and signs show that it is gearing for better growth prospects this year.

Growth of domestic industries

The economy of South Korea is largely dependent on export. However there is a boom in domestic industries right now. In Busan, interior decorating companies are struggling to cope up with the high demand for home renovation and interior decoration. The trend has been on the rise since June last year. They are currently suffering a backlog because there are not enough workers to fill up the demand. This is one of the reasons for the resurgence of South Korea’s economic growth in Q3 of 2013.

In the last three months of 2013, the gross domestic product of South Korea grew by 3.9%, which was actually what economists have predicted. However, the trend of increased export earnings was broken, because it was the domestic demand that grew, with the purchase of services and goods far greater than the country’s export according to the report of the Bank of Korea.

Still, the country’s export industry is not far behind. With South Korea’s economy closely tied to exports, which normally account for over half of the country’s GDP, it still grew 4.3% in 2013, with the increased domestic demand a clear sign of the growing trust in global economic recovery.

For the past two years investment in transport equipment and machinery dipped dramatically because manufacturers were nervous about the demand overseas. During the last quarter of 2013 it rose by 9.9% and it is predicted that this rebound will continue in 2014, especially in the automotive and electronics sector. Overall the Bank of Korea predicts that the economic expansion this year will be around 3.7%, with their export industry foreseen to grow to 6.4% in 2014.

Rosy outlook

Policy makers and analysts foresee that the export-reliant economy of South Korea will experience smooth sailing in 2014, with the improvement in its exports as well as the economic recovery happening in developed nations. The United States is predicted to support the economic activities in South Korea, which is home to global manufacturing firms such are Hyundai Motors and Samsung Electronics.

Even the IMF has raised the growth forecast globally, saying that the economic downturn is fading and growth of the emerging markets are likely to be picked up by the advanced nations.

South Korea’s growth is seen to be continuously buoyed by private consumption while government spending will have a slower growth, placed at just 2.0%. Financial analysts say that the Korean Central Bank might be inclined to keep interest rates at a lower level to help increase domestic consumption. What worries South Korean banks and the finance sector is the strengthening of the won against the dollar despite it still being weaker based on its levels before the financial crisis in 2008.

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