Last year was greatly challenging, in particular because weaker demand from the advanced economies and the People’s Republic of China (PRC), the Republic of Korea’s biggest market, dealt a double blow that knocked the wind out of exports and growth momentum. The adverse external outlook had knock-on ef...
fects on domestic demand, especially plant and equipment investment. Mildly accommodative monetary and fiscal policy provided some relief, but growth slowed significantly from 3.7% in 2011 to 2.0% in 2012. In parallel with global outlook trends, in particular the evolution of the euro area crisis, growth momentum weakened from the first quarter to the second and third quarters before picking up somewhat in the fourth quarter (Figure 3.11.1).
Feeble domestic demand provided little relief from the fragile external environment. Plant and equipment investment, heavily dependent on exports and sensitive to the global business cycle, contracted by 1.9% after expanding by 3.6% in 2011. Construction also contracted because of the stagnant housing market and feeble private sector demand overall.
Private consumption growth moderated from 2.4% in 2011 to 1.7% in 2012, as large household debt and the stagnant housing market combined to outweigh the influence of a healthy employment gain of 440,000, which
kept the unemployment rate at 3.2%. Except for government consumption, all components of aggregate demand made smaller contributions to growth in 2012 than in 2011 (Figure 3.11.2).
The contribution of net exports fell by half from 1.8 percentage points in 2011, and that of investment plummeted into negative territory from 0.4 percentage points in 2011. In short, the uncertain global outlook precipitated slower exports and an outright contraction of investment. Disappointing performance in 2012 marks a further deceleration from the 6.3% growth of 2010 and is fueling broader concerns about growth prospects over the medium and long term.
Private consumption, governement consumption, Investsment, Nat exports, Statistical discrepancy, GDP...
Bank of Korea. Economics Statistics System. http://ecos.bok.or.kr/EIndex_en.jsp (accessed 24 January 2013), Asian Development Outlook 2013 - http://www.adb.org/sites/default/files/ado2013-korea.pdf
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