Seoul: South Korea’s economy grew in 2021 at the fastest pace for 11 years thanks to robust exports and strong activity in the service sector, the central bank said Tuesday.
The 4.0 percent expansion, which came in line with forecasts, was the best performance since 2010 and came despite the pandemic hurting global supply chains.
The strong data will give the Bank of Korea some room to further tighten interest rates as it looks to battle inflation, which is sitting at a decade high.
Bank officials have lifted the benchmark rate three times since August — the latest hike this month took them to 1.25 percent — and have indicated more this year.
South Korea is home to leading technology firms including Samsung Electronics, the world’s top smartphone maker and whose chips are used in a wide range of devices.
Exports jumped nearly 10 percent in a sharp turnaround from 2020 when they contracted 1.8 percent as the pandemic forced governments around the world to shut down their economies to battle the Covid spread.
Domestic consumption increased 3.6 percent, having contracted five percent the year before. But the construction shrunk 2.2 percent, the BOK data showed, continuing a trend of negative growth from the previous year.
“On the production side, while the decline in construction was sustained, manufacturing and services reversed to an increase,” the central bank said in a statement.In the fourth quarter, GDP grew 4.1 percent on-year.
The central bank has raised its benchmark rate three times since August — the latest hike this month took them to 1.25 percent — and has indicated it could make the same move later this year owing to increased fears about inflation, which is sitting around a decade high.