By Kim Yon-se
Korean consumers’ purchasing power has weakened on average even though the economy sustained its pace of growth during the first quarter, a Bank of Korea report showed Wednesday.
The central bank said the country saw its growth rate of gross domestic product post 4.2 percent in the first quarter on a year-on-year basis and 1.4 percent on a quarter-to-quarter basis.
But the gross domestic income ― an indicator for national purchasing power ― fell by 0.6 percent from a quarter before. A drop in the GDI scale is the first case in 27 months since minus 0.6 percent in the fourth quarter of 2008.
BOK officials attributed the nation’s weakened buying power to unfavorable terms of trade in exports and imports.
“As international oil prices skyrocketed, the number of goods that consumers can purchase has dropped,” a BOK director general told a news briefing.
According to the BOK data, export prices of LCD panel and semiconductors fell by 12.2 and 10.3 percent respectively. On the contrary, import prices of raw materials including crude oil surged by 21.2 percent.
As long as the trend of high raw material prices continues, the nation’s real purchasing power will continue to deteriorate despite GDP growth, economists say.
An economist at the Korea Institute of Finance cited high consumer prices as another factor for the weakened purchasing power. “Since the fourth quarter of last year, real income of households has been reduced amid rising inflationary pressure,” he said.
LG Economic Research Institute analyst Shin Min-young predicted the trend would continue through the second quarter of this year.
In the meantime, central bank officials stressed that brisk exports led the economic growth in the first quarter.
On a quarterly basis, exports, which account for about 50 percent of the nation’s GDP, gained 3.3 percent in the first quarter after expanding 2.6 percent three months earlier.
The BOK maintained its 2011 growth forecast at 4.5 percent, but revised up its inflation projection to 3.9 percent this year from an earlier forecast of 3.5 percent.
(kys@heraldcorp.com)