South Korea’s economy grew the most in two years in the first quarter as the government front-loaded spending and exporters weathered the slide in the yen that aids rivals in Japan.
Gross domestic product gained 0.9 percent from the previous three months after a 0.3 percent increase in the fourth quarter, the Bank of Korea said today. That exceeded the median 0.7 percent estimate of 15 economists surveyed by Bloomberg News.
President Park Geun Hye unveiled a $15 billion extra budget and property stimulus package this month as Asia’s fourth- largest economy grapples with the yen’s decline, record household debt and a stagnant housing market. Today’s report may encourage Bank of Korea Governor Kim Choong Soo to continue to resist political pressure for an interest-rate cut after his officials left borrowing costs unchanged on April 11.
“A solid GDP figure will definitely reduce any bets on a further rate cut,” said Kong Dong Rak, a fixed-income analyst at Hanwha Investment & Securities Co. in Seoul. “Given government stimulus and improving global economic conditions, we may see even faster growth in the second half.”
The economy grew 1.5 percent from a year earlier as the government gave a fiscal boost by allocating 72 percent of this year’s budget spending to the first half.
The yen is down about 20 percent against the dollar for the past six months, while the won depreciated by only about 2 percent. The Korean currency rose 0.3 percent to close at 1,117.70 per dollar yesterday in Seoul, according to data compiled by Bloomberg.
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