South Korea's Economic Growth Slows on Spending Cuts
South Korea's economy expanded at the slowest pace in more than three
years in the first quarter as consumers and companies curtailed
spending.
The economy grew 0.7 percent from the previous quarter, when it
advanced 1.6 percent, the central bank said in Seoul today. That
compares with the 0.9 percent median estimate of 13 economists
surveyed by Bloomberg News.
Rising fuel costs combined with a deteriorating outlook for ex****ts
prompted companies to reduce investment, while record household debt
is sapping consumer buying power. The government is considering adding
4.9 trillion won ($4.9 billion) to its budget for the year in an
effort to sustain the country's nine- year expansion, Finance Minister
Kang Man Soo said yesterday.
``The government will gear up efforts to sup****t growth as domestic
demand, especially cor****ate spending, weakens,'' said Chun Chong Woo,
senior economist at SC First Bank Korea Ltd. in Seoul. ``Companies
won't spend more when things are all looking bad despite President
Lee's drive to promote business spending.''
Economy to Slow
Slowing economic growth may add pressure on the Bank of Korea to join
the U.S., England and Canada in cutting interest rates. The Bank of
Canada this week lowered its benchmark rate by half a point to
stimulate the economy.
Governor Lee Seong Tae left borrowing costs unchanged at 5 percent for
an eighth straight month on April 10 and said economic growth may slow
``significantly'' and inflation may moderate, fueling speculation he
will cut borrowing costs this year. The board next meets on May 8.
``Things will get worse in the second quarter, but growth may pick up
in the second half as ex****ts remain steady and business spending
gathers pace again,'' Choi Chun Sin, head of the central bank's
statistics department said in Seoul today. ``It will be difficult for
private spending to recover.''
Real gross domestic income, a measure of purchasing power, fell 2.2
percent from the previous quarter, when it rose 0.3 percent. That's
the biggest drop since the fourth quarter of 2000.
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