Bank of Korea: Economy Contracted 5.6 Pct. in 4th Qtr.

The Korean economy suffered negative growth in the fourth quarter last year, its worst record since the 1998 Asian financial crisis, the Bank of Korea said yesterday.

China, which was expected to support the global economy, showed its lowest growth in seven years. Other major economies are also slipping into deep recession.

The Bank of Korea said real GDP in the fourth quarter last year fell 5.6 percent from the third quarter, the worst since a fall of 7.8 percent in the first quarter of 1998.

Real GDP in last year’s fourth quarter also fell 3.4 percent year-on-year, the worst since minus six percent in the fourth quarter of 1998.

The three major pillars of economic growth also fell. Exports dropped 11.9 percent, domestic consumption 4.8 percent and capital investment 16.1 percent in the fourth quarter from the third, dragging down economic growth.

Output by manufacturers decreased 12 percent from the third quarter due to a cut in production in semiconductors, steel and auto industries, showing the worst performance since the statistic was introduced in 1970.

With the unexpected sharp drop in growth in the fourth quarter, last year’s annual GDP growth reached just 2.5 percent, the lowest since minus 6.9 percent in 1998.

The index for real gross domestic income reflecting trade conditions fell 2.9 percent in the fourth quarter from the third and dipped 2.1 percent year-on-year.

Gross domestic income dropped for the first time since negative growth of 7.2 percent in 1998.

“Based on interim statistics, per capita income fell below 20,000 U.S. dollars,” said Choi Chun-shin, head of the bank’s statistics department. “If a new statistics with a different base year in March is used, it will be around 20,000 dollars.”

Over in China, financial authorities said last year’s growth rate was nine percent, the lowest in seven years.

The International Monetary Fund next week will cut its growth forecast of 2.2 percent for the world economy made in November last year.

“If the trends continue, this year’s annual economic growth will be negative and global economic recovery could be delayed,” said Kang Seok-hun, a professor at Sungshin Women`s University.

“The government must respond more aggressively; they must increase spending through a supplementary budget and create public funds preemptively to bring stability to the financial market.”

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