South Korea confirmed yesterday that the recovery was still alive and well in its economy with a surprisingly robust rise in first quarter growth.
It’s more good news for countries like Australia as worries about Greece cloud the prospects of the European economy and threaten to damage the economic recoveries there and in the US.
A fall in markets in Australia today and in Asia shouldn’t obscure the fact that the region remains well-placed to ride out any problems from Europe.
But we should keep a very close watch on the Chinese property market which is the biggest danger to growth in that country and the region.
China, India, Singapore, Australia and now South Korea are all looking for sustained or increasing levels of growth over the rest of 2010 and into 2011.
South Korea’s central bank said GDP jumped a seasonally adjusted 1.8% from the 4th quarter of 2009, much faster than the 0.2% rise recorded in that quarter.
That was ahead of all forecasts and even stronger than the central bank’s flash estimate earlier this month of 1.6%.
Just as important was the fact that GDP was up a very sharp 7.8%.
As a result the Bank of Korea boosted its estimate for 2010 growth.
It’s now predicting 5.2% growth for 2010, compared to a previous 4.6% forecast.
That’s why the likes of Singapore, Australia, India, Vietnam, Malaysia and, to a lesser extent, China have started tightening monetary policy.
The Bank of Korea said the country’s manufacturing sector "shifted to a positive growth rate of 3.6%" due mainly to an upturn in electrical and electronic equipment manufacturing.
Goods exports rose 3.4% in the first quarter compared with the previous three months, when they fell 1.5%.
Private consumption increased 0.6% from the December quarter and government spending jumped 5.7%.
Imports rose 5.4%, a good sign given that the country is like Japan, resource rich and depends upon an efficient manufacturing sector to convert imports into high priced exports.
It is unlike Japan, where the growth in imports is still well below the recovery in exports.
But China has seen a jump in imports that has outstripped the growth in exports in recent months.
The construction sector rose 1.6%, while services rose 1.5%, due partly to growth in transport and storage.
The government forecasts overseas shipments will rise 13% this year to $US410 billion driven by the surging growth in China, the country’s biggest export market (and Japan’s).
Despite this solid growth, there’s no sign the central bank will raise rates from the current record-low of 2%, where they have been for 14 months.
