South Korea narrowly avoids recession in first quarter (Roundup)

Seoul - South Korea's economy unexpectedly grew slightly by 0.1 per cent in the first three months of 2009 compared with the last quarter of the previous year, thereby narrowly avoiding sliding into a recession. The gross domestic product (GDP) was up 0.1 per cent, the Bank of Korea said Friday, compared to a 5.1-per-cent decline in the previous month. A country is technically regarded to be in a recession when the GDP declines two consecutive quarters compared to the previous quarter. South Korea's economy was buoyed by interest rate cuts, infrastructure spending and a government tax cuts worth 37 billion dollars. However, the GDP of Asia's fourth-largest economy contracted by 4.3 per cent year-on-year, owing to drops in production and the service sector, the central bank said. 'On the expenditure side, construction investment showed robust growth while private consumption, facilities investment and exports all fell steeply,' the Bank of Korea said in a statement. Construction investment was up by 6.1 per cent, mainly helped along by a government stimulus package. The Seoul government in March passed a 28.9-trillion-won (21.5 billion-dollar) stimulus package aimed at boosting infrastructure projects and job creation. Private consumption was up 0.4 per cent compared with the previous quarter, and exports, which account for 60 per cent of South Korea's GDP were up 3.4 per cent, after falling by 12.6 per cent in the final quarter of 2008. South Korea has been heading towards its first recession since the end of the Asian financial crisis in 1998. According to a Finance Ministry forecast the country's economy is set to contract by 2 per cent in 2009, after growing by 2.2 per cent the year before. 'The Korean economy is still on a downturn trend although a sharp decline in economic activity eased considerably,' said Choi Chun Sin, head of the central bank's statistics department.