By Kim Soo-yeon
SEOUL, June 7 (Yonhap) -- The South Korean economy grew slower than earlier forecast in the first quarter as consumer spending was subdued and facility investment remained weak, the central bank said Friday.
Korea's gross domestic product (GDP), the broadest measure of economic performance, grew a revised 0.8 percent in the January-March period from three months earlier, down from a previous estimate of 0.9 percent on-quarter expansion, according to the Bank of Korea (BOK).
Despite the downward revision, the first-quarter reading marked the fastest growth since the first quarter of 2012. It also quickened from the 0.3 percent on-quarter growth in the fourth quarter. The GDP advanced 1.5 percent on-year in the first quarter.
The BOK said that the growth path largely remains intact, given data of exports and factory output.
"The economic growth is not much deviated from the growth path that we earlier forecast. There is a possibility that the growth would turn upward down the road," Jung Young-taek, the director of the BOK's national accounts division, told reporters.
Jung said the country's trade terms are expected to be on the improving trend as prices of tech products have risen since mid-February.
The government is ramping up efforts to bolster the economy, which the yen's slide threatens to weigh on. The yen has depreciated more than 14 percent per the U.S. dollar so far this year, putting Korean exports at a disadvantage in pricing in overseas markets. The won has advanced some 11 percent against the yen so far this year.
The government, which has drawn up an extra budget of 17.3 trillion won (US$15.5 billion), forecast the Korean economy to grow 2.3 percent this year. The BOK's 2013 growth estimate stood at 2.6 percent.
"The local economy is expected to perform better in the second half if the U.S. economy would recover as expected," said Lee Sang-jae, an economist at Hyundai Securities Co.
"But it remains to be seen what impacts the yen's fall would have on Seoul's exports though it has had limited effects so far," Lee said, adding that the BOK is likely to freeze the key rate in June.
In May, the BOK surprised the market by making its first rate cut in seven months, a move aimed at lending support to the government's drive for the economic stimulus. The central bank lowered the borrowing costs in July and October last year.
Exports, which account for about 50 percent of the economy, grew 3 percent on-quarter in the first quarter, less than its earlier estimate of 3.2 percent. But the first-quarter data was compared with a 1.1 percent contraction in the fourth quarter.
Domestic demand fell 0.4 percent last quarter, down from an earlier estimate of 0.3 percent and the worst performance in four years.
The still-high household debt is weighing on consumers' spending, further denting the economic growth. Korea's household credit totaled 961.6 trillion won.
Facility investment gained 2.6 percent, down from an earlier estimate of a 3 percent growth. Construction investment grew 4.1 percent, higher than the previous estimate of a 2.5 percent gain.
Meanwhile, the gross national income (GNI), a gauge of purchasing power of the population, rose 0.8 percent on-quarter in the first quarter, picking up from 0.3 percent in the previous quarter and the fastest growth in three quarters, it said.
Korea's trade terms improved last quarter as import costs fell at a sharper pace than export prices, the central bank said.
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