South Korea's economy likely expanded modestly in the fourth quarter on improved exports, a Reuters poll shows, but analysts warned a firm recovery was still some way off due to persistent global uncertainties.
The median forecast from a survey of 18 analysts was for South Korea's gross domestic product to increase a seasonally adjusted 0.5 percent in the October-December period, up from a 0.1 percent gain in the September quarter.
This would mark the first acceleration in growth in three quarters, with analysts saying the July-September period may have been the trough. Exports rose modestly in October and November after having declined throughout the third quarter.
"Growth in Korea has stabilised in the fourth quarter, with stronger shipments improving manufacturing conditions," said Ronald Man, an economist at HSBC based in Hong Kong.
"This has made Korea well poised for an export-led recovery."South Korea's economy, the fourth-largest in Asia, derives just more than half of its annual gross domestic product from private consumption within the country, but its jobs market relies heavily on investment led by export industries .
Bank of Korea Governor Kim Choong-soo told reporters early this month that the fourth-quarter growth was estimated at 0.4 percent, far below the 0.8 percent expansion forecast previously On a year-on-year basis, South Korea's economy likely grew by a median 1.9 percent during the fourth quarter, the survey shows, compared with 1.5 percent growth recorded in the July-September period.Analysts said that South Korea's growth would likely remain subdued for the coming quarters, as the global economy has yet to fully recover and as domestic households have little room to increase spending while struggling under heavy debt.
"Domestic demand may freeze up further, as supportive measures in the property market and domestic car sales expired in December," said Park Sang-hyun, economist at HI Investment & Securities in Seoul."These issues could continue to drag down the economy and lead to weaker-than-anticipated growth in the first quarter."The Bank of Korea delivered two rate cuts last year -- in July and October -- to jumpstart the stagnant economy.
It has since kept the rates unchanged, but the majority of analysts predict a cut in February or March. Soon after the Jan. 11 policy meeting, and reinforcing a challenging outlook for the economy, the central bank slashed its economic growth forecast for 2012 to 2.0 percent from 2.4 percent set in October, compared with 3.6 percent growth in 2011