South Korea’s current account showed deficit for the first time in a year

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Thu, Feb 25 2010, 00:17 GMT
by ecPulse.com analysis team

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South Korea’s current account turned to show deficit for the first time in a year as exports declined, while imports of energy increased. Officials still optimistic about the future as they are expecting growth to accelerate despite consumer demand and government spending declined.

South Korea’s current account showed a deficit of $447.5 million in January, the first deficit since January 2009 after recording a surplus of $1521.5 million. The goods balance surplus narrowed to $1549 million from $4023 million.

The cold winter led to increasing demand for energy that widened the shortfall. Exports declined alongside slowing global demand and concerns about recovery in Europe especially with the increasing debt risks.

However, economic growth slowed to 0.2% in the fourth quarter of last year, but still President Lee Myung expects accelerating growth in 2010. Lee said the economy will expand 5% this year which is the highest in three years, worth mentioning that gross domestic product grew 0.2% allover 2009.

The manufacturing sector showed signs of improvement in the second half of 2009, and industrial production continued to rebound in the past six months. The government’s stimulus spending helped to boost domestic demand, in addition to the increasing demand from China that supports manufacturers.

Moreover, the Bank of Korea kept interest rates at its lowest record of 2.00% to guarantee a solid recovery. The bank signaled it will start withdrawing loans provided to commercial banks to fund small companies, as the bank aims at avoiding excessive liquidity in markets.

Unemployment in South Korea rose to 4.8% in January the highest in 10 years from 3.5% in December, as construction companies fired more workers amid instability in the global economy.

Published on Thu, Feb 25 2010, 00:18 GMT