SKorea’s economy grows 1.4 percent in 1st quarter

SEOUL, South Korea (AP) — South Korea’s economic growth accelerated sharply in the first quarter on strength in exports and manufacturing, though high prices for food and gasoline weighed on consumer spending.

Gross domestic product expanded 1.4 percent in the three months ended March 31, the Bank of Korea said. That compares with growth of 0.5 percent in the final three months of last year. The figure narrowly missed the bank’s own forecast of a 1.5 percent expansion.

It was the ninth straight quarter of growth for South Korea, which has enjoyed a robust recovery from the global economic downturn. Like neighboring China and some other countries, however, it is battling inflation that in March hit its highest level in more than 2 1/2 years. The BOK has raised its key interest rate four times since July to try and curb rising prices.

Asia’s fourth-largest economy grew a robust 6.2 percent in 2010, following weak growth of 0.3 percent the previous year as its export-oriented economy suffered amid a contraction in global trade.

The first-quarter growth figures announced Wednesday are preliminary and may be revised.

Exports of goods and services grew 3.3 percent led by semiconductors, electronic components and automobiles, the BOK said. Manufacturing in South Korea, home to global companies including Samsung Electronics Co. and Hyundai Motor Co., increased 3.2 percent.

Private consumption advanced 0.5 percent, compared with a gain of 0.3 percent in the fourth quarter, on spending for automobiles and audiovisual equipment, which the bank said offset what it described as “sluggish” outlays for food and other nondurable goods.

“Consumption was weak because of high inflation,” said Oh Suk-tae, regional head of research in South Korea at Standard Chartered First Bank Korea, citing the increasing cost for “food and oil” as the main reason.

South Korea’s consumer price index hit 4.7 percent in March, its highest level since 4.8 percent in October 2008, the government announced earlier this month.

The solid performance in exports and manufacturing and the overall gain in consumption helped counter declines in capital spending, which contracted 0.8 percent, and construction investment, down 6.7 percent.

The agriculture, forestry and fishing sector, meanwhile, contracted 5.1 percent, due to a blow to livestock caused by a devastating outbreak of foot-and-mouth disease that began late last year and led to mass culls of animals, mostly pigs.

South Korea’s economy also grew 4.2 percent in the first quarter compared with the same period last year, the bank said.

The BOK expects growth to slow to a more normal 4.5 percent in 2011 after last year’s bounce back from the crisis — matching a forecast by the International Monetary Fund — before picking up to 4.8 percent in 2012. The South Korean government says growth could come in at about 5 percent.

South Korea’s benchmark stock index rose by a fraction to close at 2,206.70, giving up earlier gains of as much as 1 percent. The South Korean won, meanwhile, strengthened 1 percent to finish at 1,079.50 to the dollar.

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