Recovery Data Fueling Pressure for Rate Hike

Statistics confirming recovery in production, exports and domestic demand are pressuring the government to raise the benchmark interest rate, a key move toward an exit strategy.

The Bank of Korea said Tuesday that economic growth reached 7.8 percent in the first quarter this year from the same quarter last year, an “earnings surprise” that exceeded the expectations of both the government and the central bank. The growth was also the highest since the fourth quarter of 2002.

In a report on real GDP growth, the bank said the first quarter growth surpassed its prediction of 7.5 percent made April 12. Asia`s fourth-largest economy also grew a seasonally adjusted 1.8 percent in the first quarter from the previous quarter`s 0.2 percent, posting positive growth for the fifth consecutive quarter.

“The Korean economy has almost returned to normal as it comes close to the long-term growth curve from a bigger perspective,” said Kim Myeong-ki, director of the central bank’s economic statistics department.

“The economy seems to be continuously recovering at a time when exports play a big role and the government and the private sector evenly contribute to growth.”

weappon@donga.com