S. Korean gov't contribution to GDP growth hits nearly 20-year high in Q4

The contribution of government spending and investment to South Korea's economic growth reached a nearly 20-year high in the fourth quarter of last year amid sluggish private consumption and production, central bank data showed Sunday.

According to the latest data by the Bank of Korea (BOK), South Korea's gross domestic product (GDP) grew a surprising 1 percent in the October-December period from three months earlier. It helped meet the BOK's target of a 2.7 percent expansion for the whole of 2018.

In the fourth quarter only, the government side contributed 1.2 percentage points to GDP growth, marking the largest figure since the first three months of 2009.

The contribution of government spending, which increased 3.1 percent on-quarter, came to a nearly nine-year high of 0.5 percentage point over the cited period, while that of government investment also marked an almost 20-year high of 0.7 percentage point.

South Korea's gross domestic product growth (Yonhap)

South Korea's gross domestic product growth (Yonhap)
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South Korea's gross domestic product growth (Yonhap)

However, the private consumption, corporate investment and exports, actually contributed to a 0.3 percentage-point contraction of the GDP.

In effect, the government's expansionary fiscal policies offset a decrease in other sectors in the last three months of 2018.

Construction and facility investment gained 1.2 percent and 3.8 percent, respectively, turning around from negative growth from three months earlier.

"An increase in the government-funded public works projects pushed up construction investment by 1.2 percent in the fourth quarter," said Park Yang-su, director general of the economic statistics department at the BOK.

Increased government spending on military equipment also lent support to facility investment in the period, he added.

The South Korean government mapped out a budget of 470.5 trillion won (US$421.2 billion) for last year, up a 10-year high of 9.7 percent from a year earlier, heralding a greater fiscal role in Asia's fourth-largest economy. It also funneled an additional 4 trillion won into the economy in the first half to prop up growth.(Yonhap)