South Korea
South Korea's economy expanded faster than economists forecast in the fourth quarter, driven by the biggest increase in exports in four years and a pickup in business investment.
Growth accelerated to 1.5 percent from the third quarter's 1.3 percent, the central bank said in Seoul today. That beat the median estimate of 1.3 percent in a Bloomberg News survey of 14 economists. The economy advanced 5.5 percent from a year earlier, the fastest pace in almost two years.
South Korea's stocks and currency climbed as the report fanned confidence that rising shipments to China, eastern Europe and the Middle East will help Asian nations weather the U.S. slump. As global growth cools, the economy will be increasingly reliant on spending by businesses and consumers to extend its longest expansion in more than 15 years.
“The Chinese economy is supporting economic growth in Korea and across Asia as the U.S. slows,'' said George Worthington, chief Asia-Pacific economist at Thomson IFR in Sydney. The report also shows “quite a solid performance from the domestic economy,'' he said.
Deputy Finance Minister Cho Won Dong said today that the nation's increasing trade with China and Asia “will help us be less affected'' by a slump in the world's biggest economy.
The Kospi index climbed 1.8 percent to 1,692.41 at close of trading in Seoul, recording its first three-day advance in seven weeks and reducing this year's decline to 10.8 percent. The won rose 0.3 percent to 946.45 per U.S. dollar. The yield on the five-year government bond jumped 12 basis points to 5.30 percent.
China's Growth
China's economy expanded more than 11 percent for the fourth straight quarter, figures showed yesterday, supporting global growth as a recession looms in the U.S.
South Korea's exports surged 7.3 percent in the three months ended Dec. 31 from the previous quarter, the biggest increase since the fourth quarter of 2003, today's report showed.
Companies benefiting from higher global demand include LG Electronics Inc., Asia's second-largest mobile-phone maker, which yesterday posted a record quarterly profit.
Samsung Heavy Industries Co., the world's second-largest shipyard, today signed an agreement to build two drill ships for $1.3 billion. Shipyards in South Korea won about half of the global $187.3 billion in vessel orders last year.
Television Sales
Samsung Electronics Co., whose overseas sales account for 16 percent of South Korea's total exports, has tapped demand in China and India. Asia's largest electronics maker expects industry wide sales of liquid-crystal-display televisions globally will rise 30 percent in 2008 pay day loans.
“We are not satisfying demand from customers,'' Cho Yeong Duk, vice president of Samsung's LCD division, said on Jan. 15.
China surpassed the U.S. in 2003 to become South Korea's largest market, buying more than 21 percent of the nation's goods. Exports to China jumped 18 percent in the period from Jan. 1 to Dec. 20 and shipments to the Middle East surged 40 percent.
Goldman Sachs Group Inc. this month raised its forecast for South Korea's economic growth, predicting an expansion of 5 percent in 2008 compared with 4.9 percent last year.
Others aren't as optimistic.
UBS AG today cut its 2008 growth forecast to 3.6 percent, which would be the weakest in five years, saying both exports and consumption will slow. It previously estimated 4.1 percent.
`Growing Challenges'
South Korea's “challenges appear to be growing now we expect a U.S. recession,'' said Duncan Wooldridge, a Hong Kong- based economist at UBS. “Export growth should slow in line with weaker demand from the U.S., Europe, and Japan. And a slowdown in credit will lead to weaker domestic demand, especially consumption.''
Businesses are expanding to take advantage of global growth. Corporate investment in factories reversed the third quarter's drop and climbed 4.4 percent last quarter. Private consumption increased 1.1 percent last quarter, today's report showed, compared with a 1.2 percent gain in the previous three months.
The lowest jobless rate in five years and wage gains are underpinning consumer spending as fuel costs surge to a record.
“The issue now is how much the U.S. slowdown will hurt exports and economic growth, not whether we'll be affected,'' said Oh Suktae, an economist at Citibank Korea Inc. in Seoul. “Clearly, South Korea will have to rely more on the role of domestic demand.''
President-elect Lee Myung Bak aims to stoke growth by encouraging firms to invest more and increase hiring. He announced a series of tax breaks on capital expenditure and has proposed relaxing rules that limit investment in banks by industrial groups.
The government expects domestic demand will account for about 90 percent of its forecast 4.8 percent growth rate in 2008.
“The engine for economic growth this year will be corporate investment,'' said Kwon Goohoon, an economist at Goldman in Seoul. “Companies will spend if regulations are eased swiftly.''