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Some economists are seeing signs that business conditions are starting to pick up, but because the modest economic growth wasn't connected to an increase in income, business sentiment is still cold.
The Bank of Korea announced on Wednesday that the country's gross domestic product (GDP) expanded by 0.9 percent in the January-to-March first quarter. That's the same rate of growth posted in the previous quarter, and a 4 percent rise compared to the same quarter last year.
Lee Kwang-june, director of the central bank's economic statistics division, said that business conditions had hit a short-term low point and the situation should start to gradually improve.
The central bank predicted that since consumer spending and corporate capital expenditures are still growing, the economic growth rate will reach 4.7 percent in the second half and result in a 4.4 percent gain for the whole year. But that's still below the global average growth rate of 4.9 percent that the IMF expects.
Park Jong-kyu, an economist with the state-run Korea Institute of Finance, expressed doubt the economy is hitting bottom. "The economy has been repeating a cycle of a sudden increases and falls in recent years, which are signs that we're stuck in a structural low-growth trap."
The rate of growth of gross domestic income (GDI), which is connected to purchasing power, decreased 0.7 percent in the first quarter. That's the first time GDI has contracted since the first quarter of last year, and it means the economy grew but income took a step backwards. GDI is calculated by subtracting the trade deficit from GDP.
The trade deficit in the first quarter was W18.8267 trillion (US$1=927), which is the largest-ever deficit for a single quarter. The loss was due to a rise in international oil prices while exported chip prices fell. That means most of the gains from the economic growth were sent overseas.
"Economic conditions seem to have hit bottom in the first quarter but because of the large size of household debt, it is hard to predict a fast recovery in domestic consumption," said Hwang In-sung, an economist at the Samsung Economic Research Institute.
(englishnews@chosun.com )
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