News Room - Business/Economics

Posted on 24 Apr 2009

S. Korean economy shrinks 4.3 percent in 1st quarter

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.

 

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, managed to grow from the previous quarter, expanding 0.1 percent from the final three months of last year, when GDP shrank 5.1 percent.

 

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.