South Korea's growth hit by weak European demand

South Koreans have a huge amount of personal debt through credit cards and mortgages

 

South Korea's economy grew at a slower pace in the fourth quarter of 2011, as the global economy weakened and the eurozone debt crisis hit exports.

Gross domestic product expanded by 0.4% in the three months to December, compared with the third quarter, when it gained 0.8%, the central bank said.
Compared with the same period the previous year, the economy grew 3.4%.
The Bank of Korea said the slowdown in exports was compounding problems in the country.
Debt concern "While private consumption and investments in facilities and the construction sector remained sluggish, exports also turned negative in the fourth quarter from the previous quarter," the Bank of Korea (BOK) said in a statement.
Exports fell 1.5% in the fourth quarter, compared with the third, when overseas shipments gained 2.2%, the data showed.
Analysts said they expected the pace of growth to fall further as the global economy remains weak.
"What it has to struggle against is the possibility of the eurozone falling into a tailspin," Jasper Kim from the Asia-Pacific Global Research Group in Seoul told the BBC.
However, Mr Kim pointed out that South Korea was already struggling with its own debt before the eurozone debt crisis began.
"Korea has a unique debt problem, it has nearly $1 trillion (£639bn) worth of personal debt, half of which are credit cards and a notable portion dealing with mortgages," he said.
Increasing risks The BOK said earlier this month that risks to South Korea's economy were increasing and growth may slow for some time before picking up.
It decided to leave interest rates on hold on 13 January for the seventh month in a row.
Like some other countries in the region, authorities in export-dependent South Korea face a dilemma. They must weigh the need to bring down high inflation with the possibility that they may need to boost growth to counter the slowdown in Europe.
Over the whole of 2011, the South Korean economy grew by 3.6%, compared with expansion of 6.2% seen in 2010.
The BOK is forecasting growth of 3.7% in 2012 and 4.2% in 2013.