By Na Jeong-ju
Staff Reporter


The economy grew 5.2 percent from a year earlier in the fourth quarter, the highest pace in six quarters and stronger than the central bank’s earlier projection of 4.8 percent, the Bank of Korea (BOK) said on Wednesday.

The stronger-than-expected growth reflects recovering private consumption, corporate investment and solid exports, the bank said.

For 2005, the real gross domestic product (GDP), the total output of goods and services, grew 4.0 percent, the bank said.

BOK officials said the GDP data indicate the economy is on a fast recovery track as the demand for goods and services is picking up.

The BOK expected late last year in a preliminary report that the GDP to grow 4.8 percent in the fourth quarter, raising the full-year GDP growth to 3.9 percent.

``We are seeing strong signs of recovery in plant investment and private consumption, while exports remain resilient,’’ said Kim Byung-hwa, head of the BOK’s Economic Statistics Department. ``The trend is likely to continue this year.’’

The BOK said the GDP, seasonally adjusted, grew 1.7 percent from the previous quarter when it grew 1.9 percent.

Private consumption climbed 4.6 percent from a year earlier in the fourth quarter, the highest pace in three years, showing that consumers are spending more. They are buying more durable goods, such as TV sets, computers and automobiles, the central bank said.

Corporate investment in plants and equipment also grew 9.8 percent in the fourth quarter, its highest pace in five years and three months.

The gross national income (GNI), an indicator of real purchasing power, posted a growth of 1.7 percent from a quarter earlier, the highest growth since the fourth quarter of 2004, when it was 2.1 percent.

This suggests the economy felt by the ordinary people is improving in line with a strong economic recovery.

Last year, exports grew 9.7 percent, down from 21 percent in 2004. Exports’ contribution to the economic growth declined, but recovering domestic consumption offset the fall, the central bank said.

The growth rate of construction investments grew only 0.9 percent in the fourth quarter from a year earlier. For the full year, construction investments grew 0.3 percent, the lowest growth rate since 2000, when it recorded minus 0.7 percent growth. This is due to government crackdowns on real estate speculation, introduced since August 31, the BOK said.

The BOK forecast the growth rate to expand further as exports are expected to gain momentum this year amid encouraging signs for the service industry.

The BOK data boosts optimism that the Korean economy is rebounding strongly after being mired in a long-term slump plagued by weak consumer spending.

Economists and policymakers have become increasingly optimistic over the economic outlook as exports grew solidly and consumer sentiment improved.

The BOK expects the economy to grow 5 percent this year as recovery in domestic demand gathers momentum. It will be the fastest pace since 2002 when it expanded 7 percent.

jj@koreatimes.co.kr