Korean GDP up 4.6%: Exports Rise Outweighs Consumer Slump

The Korean economy showed signs of continued improvement in the fourth quarter of last year as Real Gross Domestic Product (RGDP) rose 0.94% in the fourth quarter, compared with 0.81% in the third quarter. For the year 2004 as a whole, real GDP was up 4.66%, compared with 3.15% in the previous year.

Exports of goods and services in 2004 rose almost 20% in spite of a 15% appreciation of the won. Consumer expenditures remain subdued as consumers have been trying to restore their balance sheets after having gone on a buying spree during an earlier period of relaxed credit controls. At the end of last year, one in 13 persons was estimated to be three or more months behind on debt payments. The attached chart shows the divergent paths in the year to year increases in consumer spending and those in net exports.

Of the 30,768 billion 2000 won increase in RGDP between 2003 and 2004, 22,504 billion 2000 won, or 73% was accounted for by an increase in net exports. Consumption on the other hand, accounted for only 2.2% of the increase and while investment increased by 9,89l billion 2000 won, or 30.7%, more than half that, 18.1%, was due to inventory accumulation. Some of these figures may have been overstated as there was a statistical discrepancy in the total of -2,310.7 billion 2000 won, or -6.1%.