SEOUL -- South Korea's economy recovered to pre-pandemic levels after beating forecasts to grow 1.6% in the first three months of year.
The faster-than-expected expansion from the previous quarter was largely due to corporate investment in facilities, private consumption and government spending, according to the Bank of Korea. The median forecast in a Reuters poll of economists was for 1.2% growth.
"The Korean economy even passed the level in the right before the coronavirus pandemic," said Park Yang-soo, a director at the central bank. "The country's exports are even above the fourth quarter of 2019, although private consumption dropped about 5% compared to the level."
Park said the country's exports will continue to grow for some more time thanks to the U.S. government's strong stimulus package, but he pointed out that global chip shortage is a downside risk.
Economists expect solid export numbers in the second quarter.
"For exports, the base effects are likely to be particularly strong in April, and may lift export growth by 19 percentage points," said Park Jeong-woo, a Nomura economist. "Although the base effects appear poised to turn negative in the second half, their overall impact is unlikely to alter the underlying trend of export growth, which we expect to remain strong."
South Korea's economy shrank last year for the first time since the 1997-98 Asian financial crisis as consumer spending was hit by the coronavirus pandemic. But the country's reasonably successful handling of the pandemic and strong exports limited the contraction to 1%.
And while the country's 2020 contraction was not unusual given that most major economies other than China also shrunk, the rate was better than the likes of the U.S., Japan and the U.K.
China, South Korea's top trade partner, expanded 2.3% last year and announced earlier this month that GDP surged a record 18.3% during the first quarter of 2021.
South Korea, like other East Asian nations, has suffered far fewer COVID-19 cases and deaths than nations elsewhere. Eschewing draconian lockdowns, officials have opted for flexibility in implementing restrictions depending on the increase and decrease in infection figures.
Economists say the economy will return to growth this year on expected strong investment and exports even as consumer spending may not keep pace. The Korea International Trade Association has forecast a 6% increase in exports led by semiconductors, automobiles and petrochemicals.
South Korea's government projects GDP rising 3.2% this year. The BOK and private economists have issued similar forecasts of about 3%.
But as in other countries, such as neighboring Japan, South Korea has been experiencing a renewed surge in infections recently as coronavirus variants become dominant and the country's vaccine program makes slow progress.