Stock Market Today

By Na Haejung

SEOUL, July 5 — The South Korean Finance Ministry estimated that the nation’s economy grew 7.2 percent on-year during the first half of 2010 despite overseas financial jitters, South Korean media reported Monday.

While the economy posted a faster-than-expected economic growth, the pace is likely to slow down in the second half on the lingering eurozone fiscal debt problem and a slowdown in global economic growths, media said.

According to South Korea’s Yonhap News Agency, South Korea’s economy made progress in terms of current account, employment, and industrial production, reflecting its fast-pace recovery.

During the first half, the nation posted a current account surplus amounting to 18.9 billion U.S. dollars, with foreign currency reserves rising to 274.2 billion U.S. dollars, the second- highest level on record.

Employment conditions are also making progress, with the number of the employed increasing to 24.3 million, up 586,000 from the same period last year.

The gain in the number hit the highest amount in eight years, thanks to the fall of jobless rate, which was as low as 3.2 percent.

In addition, South Korea’s mining and industrial sector outputs led the 11th-month-straight gain in May, up 21.5 percent from a year ago.

In the same month, production prices grew 18.9 percent compared on month, while facility investment expanded 22.3 percent.

The consumer price index (CPI) is also remaining under the target level of 3 percent, posting 2.7 percent in May, followed by 2.6 percent in June.

The indices, together with the growth rate, are revealing that the nation’s overall economy is gaining steam at a fast pace.

The Samsung Economic Research Institute (SERI) is said to have estimated the economy would mark an on-year growth of 7.1 percent for the same period, similar to the estimation of the finance ministry, attributing it to advances in industrial sectors, such as automobile and semiconductor industries.

“The first-half economic data, despite its accomplishments, are resorting heavily to exports, which means domestic demand is still fragile,” Oh Moon-suk, analyst at the LG Economic Research Institute, was quoted as saying by Yonhap, adding that exports have led the gain in production and facility investment.

With economic indicators altogether pointing at a rosy picture, however, local experts are dubious on whether the economic growth will be kept at the current level.

“Despite the optimistic data, the South Korean economy is also seeing an increase of financial jitters, triggered mainly by the eurozone fiscal debt problems, which is worried to drag down the global economic recovery,” Hwang In-sung, analyst at the SERI, told Yonhap.

While the global economic recovery will continue down the road, it will not be as fast as in the first half mainly as countries may get themselves into exit strategies, trying to roll back the measures taken in the midst of the crisis, Hwang said, adding that it will in turn affect the South Korean economy.

Amid growing worries on slowdowns in the global and domestic economies, a rate hike seems more distant in the near future in South Korea although the central bank has been repeatedly hinting at a revision.

South Korea has been keeping its key interest rate at a record low of 2 percent for the 16th consecutive month.