South Korea economic growth beats forecasts

Watch: South Korea's new government is "restoring its focus" and the as a result its growth rate is likely to pick up.

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South Korea's economy grew by more than forecast in the April to June period, boosted by a jump in domestic consumption and government spending.

Growth was 1.1% higher in the quarter than in previous three months, the Bank of Korea's advanced estimates showed.

Compared with the same period last year, the economy expanded by 2.3%, above the 2% forecast by most analysts.

South Korea has unveiled a series of stimulus moves over the past few months in an attempt to spur economic growth.

Analysts said the latest data indicated that the steps were starting to have an impact on the economy.

"The consumption growth reflects the effects from the government's stimulus measures," said Kim Yoon-gee, a senior economist at Daishin Economic Research Institute.

Mr Kim added that government spending was likely to increase further as the execution of the fiscal spending is concentrated in the second half of the year.

Further growth?

Start Quote

I believe this construction and consumption-led growth will continue”

End Quote Jun Min-koo Korea Investment and Securities

These measures, including a 17.3tn won ($15.3bn; £10bn) stimulus plan announced in April, were introduced in an attempt to boost domestic consumption to offset the slowing demand for the country's exports.

Demand for South Korean exports has dipped amid a slowdown in key markets such as the US and Europe.

That triggered concerns that its growth may decline sharply, not least because exports account for nearly half of South Korea's overall economic output.

The government had said that its latest stimulus move would help create 40,000 jobs, boost a stagnant property market and cover a shortfall in tax revenue and that it expected it to help boost annual growth by 0.3 percentage point this year.

Analysts said that while South Korea's exports continue to remain under pressure amid a global economic slowdown, the moves may help it to sustain its growth.

"I believe this construction and consumption-led growth will continue," said Jun Min-koo, an economist with Korea Investment and Securities.

"Growth rates might not be as high as we saw recently but construction and private consumption will still be good."

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