By Na Jeong-ju
Staff Reporter


Data released by the Bank of Korea (BOK) Friday gave a partial answer to a lingering question of why people have not felt any improvement in their economic situation despite statistics pointing to economic improvement.

In its preliminary report, the BOK said that the nation’s gross national income (GNI), an indicator of real purchasing power, posted a growth of 0.1 percent in the third quarter from a quarter earlier, citing falling export prices and rising oil prices. The near-zero growth in the GNI came despite 4.5 percent growth in gross domestic product (GDP).

The GNI grew 0.1 percent from the second quarter, but is the lowest since a 6.1-percent fall in the fourth quarter of 1998 when the nation was suffering from a devastating currency crisis.

The stalled growth in national income reflects a sharp rise in oil prices that adversely affected trade. Higher import costs offset the nation’s export earnings, cutting into purchasing power, the BOK said.

``Oil prices climbed to record-high levels, while prices of export products kept falling, resulting in no growth in the national income,’’ a BOK official said.

He also said an increase in the payment of dividends to foreign stock investors has negatively affected the GNI figure.

The GNI growth has steadily declined. In sharp contrast to a GNI growth of 4.7 percent in the first and second quarters of 2004, it dropped to 3.6 percent in the third quarter and decreased further to 2.3 percent in the fourth.

It fell still further to 0.5 percent year-on-year in the first quarter of this year and posted a zero growth in the second.

The bank, however, said that real GDP grew 4.5 percent year-on-year in the third quarter, revised central bank figures showed. In its advance estimate on Oct. 25, the bank said the GDP appeared to have expanded 4.4 percent year-on-year in the July-September period and 1.8 percent after seasonal adjustment.

The gap between GDP and GNI figures reflects the gap between economic data and what people feel about the economy, the central bank said.

This means that despite the 3.3 percent growth in GDP, people’s purchasing power in reality gained little to nothing.

The central bank downgraded its third-quarter growth estimate for exports, while retaining estimates for consumer and corporate spending and construction investment.

Exports rose 13.3 percent on-year in the third quarter. Consumer spending expanded 4 percent, compared with a 0.5-percent fall for the full year in 2004.

Corporate capital spending and construction investment grew 4.2 percent and 0.4 percent on-year, respectively, the bank said.

The country’s real trade loss amounted to a record 12.4 trillion won in the third quarter on worsening trade terms.

South Korea’s economy is widely expected to emerge from a two-year slump this year, led by a gradual recovery in private spending.

The central bank expects South Korea’s economic growth to accelerate to about 5 percent in 2006, up from an expected 3.8 percent growth this year.

jj@koreatimes.co.kr