Economic growth in 2021 was highest in 11 years

Economy

Published: 25 Jan. 2022, 15:44 Updated: 25 Jan. 2022, 19:44

Economic growth in 2021 was highest in 11 years

Hwang Sang-pil, director general of the central bank’s economic statistics department, speaks at an online press conference held Tuesday. [BANK OF KOREA]

Korea's economy grew 4 percent last year, the highest rate in 11 years, thanks to booming exports and surprisingly strong local consumption.

According to the Bank of Korea on Tuesday, Korea’s real gross domestic product (GDP) grew 4 percent on year in 2021, the briskest pace since 2010's 6.8 percent.

The growth matched a 4 percent estimate made by the Bank of Korea last month and was a significant improvement over 2020, when the economy contracted 0.9 percent following the outbreak of Covid-19.

In the fourth quarter, GDP was up 4.1 percent compared to the previous year.

Private consumption was up 6.3 percent on year in 2021, despite the pandemic. Services were strong, including restaurants, accommodation and transportation. Government spending rose 8.1 percent, with increased expenditures on production costs and health care benefits.

Exports jumped 6.1 percent with particular strength in semiconductors and petroleum products. Imports rose 9.7 percent.

In terms of production, the agriculture, forestry and fishing sector grew 3.7 percent on year thanks to a rise in crop yields. Manufacturing rose 3.6 percent, particularly computer, electronic and optical products. Services grew 4.8 percent, led by the wholesale and retail trades.

“Face-to-face services, especially accommodation, food and cultural services, have not fully recovered from the shock imposed in 2020 and their weakness continues due to the prolonged quarantine measures,” said Finance Minister Hong Nam-ki in a Facebook post on Tuesday. “Uncertainties surrounding our economy are also rising, like the sluggish economic growth of the G2 nations, prolonging global inflation and the rapidly changing stance of key countries on monetary policy.”

Hong said Korea’s 4 percent GDP growth was “the fastest and the strongest among the G20 nations.”

“Comprehensively, the resumption of global economic activities and exports centered on semiconductors, chemical products and automobiles largely increased despite the continued spread of Covid-19 variants, as vaccination rates centered on developed nations expanded,” said Hwang Sang-pil, director general of the central bank’s economic statistics department, in an online press conference on Tuesday.

Despite the strong growth numbers, the composite consumer sentiment index was 103.9 points last month, down 3.7 points from December. A reading above 100 means optimists outnumber pessimists.

“Concerns about inconsistent incomes and jobs due to Covid-19 and recent inflation are inhibiting private spending,” said Sung Tae-yoon, an economics professor at Yonsei University. “If private consumption withers, government spending inevitably increases to boost the economy, which then results in higher debt, potentially causing a vicious cycle.”

BY JIN MIN-JI [jin.minji@joongang.co.kr]