South Korea’s economy grew at its fastest pace in 11 years in 2021 on the back of an increase in exports as reduced production in locked-down countries fueled demand for semiconductors.
Gross domestic product rose 4.1% last year, Bank of Korea data showed on Tuesday, marking a rebound from negative growth of minus 1% in 2020, when strong performance by technology makers n failed to offset a drop in consumption due to the pandemic and the disruption of exports.
South Korea’s economy grew 1.1% in the fourth quarter of 2021 from the previous quarter, while private consumption grew 1.7% as the country eased social distancing restrictions in October and people transport and catering expenses increased. The government reinstated restrictions last month following a rise in cases of the highly infectious variant of Omicron.
Exports rose 4.3% in the October-December period on a boom in demand for server memory chips as well as coal and petroleum products, while manufacturing increased by 1.1% thanks to the increase in electrical equipment.
The Bank of Korea raised its benchmark rate to pre-pandemic levels of 1 percent to 1.25 percent last week in a bid to ease inflationary pressures, despite rising Covid-19 cases.
Alex Holmes, an economist at Capital Economics, said while the outlook for 2022 remained optimistic, growth is expected to slow further this quarter. “A looming wave of the Omicron variant threatens to weigh on consumer spending, especially on face-to-face services,” he said.
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