Thanks to improvement in some of its key sectors – namely exports and construction – South Korea achieved a surprising growth in the first quarter of 2014, baffling many economists who expected less of the former Asian Tiger.
South Korea surprised economists with an unexpected growth in its first quarter. From January to March, the economy grew by 3.9% from the same quarter in 2013.
This growth can be explained by boosts in some of the country’s key economic sectors, such as exports and construction. With the US economy picking up its pace, Seoul managed to increase its exports and take advantage of the overall improvement of the economic environment with its go-to countries for exports. The Bank of Korea – the country central’s bank – estimated the growth in exports from the previous quarter to be a of 1.7%.
The Korean economy relies heavily on exports to sustain itself, with the majority of exports being finished goods, such as electronics (Samsung Electronics, LG Electronics, Taekwang Industry), ships (Hyundai Heavy Industries, Samsung Heavy Industries, Daewoo Shipbuilding & Marine Engineering), and automobiles (Hyundai Kia Automotive Group).
But perhaps the most important factor to explain this growth is the boost in construction, one of the cornerstones of Korean Economy. Let’s not forget that it is Korean companies (spearheaded by the Samsung C&T Corporation) that are responsible for some of the largest construction enterprises of the last decades – the Petronas Towers in Kuala Lumpur, Taipei 101 in Taiwan, or the Burj Khalifa in Dubai, to name a few.
Construction investment, having faced a 5.2% drop in the last quarter of 2013, swiftly recovered, with a recorded growth of 4.8% in the first quarter.
This unexpected growth in the economy of the former Asian tigers may lead the Bank of Korea to increase interest rates later in the year.
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