Exports help drive South Korea's recovery

SEOUL - South Korea's economic growth accelerated sharply in the first quarter of 2010 amid a rebound in manufacturing, exports and spending.

Asia's fourth-largest economy expanded 1.8 per cent in the three months ended March 31 from the fourth quarter last year when it grew 0.2 per cent, the Bank of Korea said.

The result beat the central bank's own forecast of a 1.6 per cent expansion made earlier this month.

South Korea has recovered strongly from the global downturn, boosted by record-low interest rates, government stimulus spending and robust exports.

The central bank said this month it expects the economy this year to grow at its fastest pace in four years. Moody's Investors Service, meanwhile, rewarded South Korea with a higher credit rating for emerging from the global crisis with its finances intact.

Growth figures for the first quarter are likely to intensify speculation about the timing of a Bank of Korea interest rate hike. The rate is currently at a record-low 2 per cent.

The economic expansion in January-March is the fifth straight quarter that South Korea's economy has grown after contracting over the final six months of 2008. The GDP results are preliminary.

"The recovery is pretty well established," said Oh Suk-tae, regional head of research at Standard Chartered First Bank Korea in Seoul. Oh said that the 1.8 per cent figure equates to an expansion of 7.5 per cent on an annualised basis.

Manufacturing grew 3.6 per cent in the first quarter after contracting 1.7 per cent in the fourth, as the country's factories churned out more semiconductors and other electronics-related products, the central bank said.

Exports also rebounded to expand 3.4 per cent after shrinking 1.5 per cent. "This growth mainly reflected the upswing in exports of cars, semiconductors and of LCDs," the bank said in a release.

South Korea is the home of Hyundai Motor Co. and Kia Motors Corp., which together form the world's fifth-biggest automotive group.

- AP