Last year, GDP actually grew 3%
According to the Bank of Korea yesterday, the Korean economy expanded 3 percent in 2013. In the central bank’s initial assessment of the year’s economic growth two months ago, it said the economy hit the central bank’s target of 2.8 percent expansion.
The BOK also reported that gross national income (GNI) per capita increased 6.1 percent from a year earlier to a record high of $26,205.
The central bank said consistent growth in consumption from the private sector as well as improvement of investment in the construction industry contributed to the higher economic growth.
In fact, consumer spending expanded 2 percent year-on-year while investment in the construction industry turned around from a 3.9 percent decline in 2012 to a 6.7 percent increase last year.
Companies’ investments on plants and machinery, however, declined 1.5 percent last year, which was a reverse turnaround from 0.1 percent growth in 2012.
Recent changes in calculating GDP statistics also boosted the figure.
The System of National Accounts 2008 is a statistical framework created by the United Nations Statistics Division that aims to improve the evaluation of economies of different countries through a common set of guidelines. In the past, economic calculations differed among counties.
Major economies including the United States, Canada and Australia have adopted the framework, which is an upgrade from the1993 guideline.
One of the biggest changes in the 2008 SNA is in categorizing expenditures made on research and development (R&D), entertainment and literary and artistic works as fixed investment labeled “intellectual property products.” Previously, these activities were treated as ancillary and didn’t show up in GDP calculations directly.
With the change, the contribution of such activities - like companies developing new technologies or products, a film producer creating a major movie or a writer releasing a new best-seller - will not only be measured but will also play a larger role in a GDP calculation.
“By including R&D in the added-value category, the economic growth has risen,” said Chung Young-taek, director for economic statistics at the central bank. Additionally, the central bank has upgraded the base year for GDP from 2005 to 2010.
BY LEE HO-JEONG [firstname.lastname@example.org]