Korea last year suffered lowest GDP growth since 2009

Korea’s GDP growth rate of last year barely recorded 2 percent due to shrunken investment and sluggish domestic demand, the lowest since 2009 when the country was reeling from the U.S.-led global financial crisis.

After deducting the effect of government spending to boost the Korean economy, growth in the private sector was found to be in the meager 1-percent range.

According to the Bank of Korea on Thursday, real GDP growth rose by 2 percent year-on-year in 2012. The figure was lower than not only 2.4 percent forecast by the central bank in October last year, but also the world outlook of 3.2 percent released by the International Monetary Fund on Wednesday.

Korea`s growth rate fell to 0.3 percent in 2009 in the aftermath of the global financial crisis, but rebounded to 6.2 percent in 2010. But the rate declined to 3.6 percent in 2011 and 2 percent in 2012.

More specifically, capital investment declined 1.8 percent year-on-year last year for the first minus growth in three years. Export growth slowed to 3.7 percent last year from 9.5 percent in 2011 and that of private consumption dipped 1.8 percent from 2.3 percent over the same period.

Government spending last year saw its highest level since the global financial crisis at 3.6 percent, and this drove economic growth instead of the private sector. Quarterly growth also fell, recording 0.4 percent in the fourth quarter from the third quarter for the 21st straight month of growth of under 1 percent.

Only gross domestic income, or GDI, saw higher growth last year (2.3 percent) from 2011 (1.3 percent) thanks to a decline in the prices of imports, including international oil. GDI indicates real domestic consumption capacity.

weappon@donga.com