SKorea's Economy Grows at Fastest Pace in 7 Years

A South Korean street vendor arranges a stall of stockings in Seoul, South Korea, Monday, Oct. 26,...

A South Korean street vendor arranges a stall of stockings in Seoul, South Korea, Monday, Oct. 26, 2009. South Korea's economy grew at its fastest pace in over seven years in the third quarter amid strength in manufacturing and capital spending, the central bank said Monday, as Asian countries lead the global recovery. (AP Photo/Ahn Young-joon)

(AP)

South Korea's economy grew at its fastest pace in over seven years in the third quarter amid strength in manufacturing and capital spending as Asian countries lead the global recovery.

Gross domestic product grew 2.9 percent in the three months ended Sept. 30 compared with the previous three months when it expanded 2.6 percent, the Bank of Korea said Monday. The result, which far exceeded expectations, marked the strongest growth since an expansion of 3.8 percent in the first quarter of 2002.

Investors cheered the news, sending Seoul's Kospi stock index up 1 percent to close at 1,657.11. The benchmark has soared 47 percent this year, erasing a nearly 41 percent decline in 2008. The South Korean won rose against the dollar.

"It seems as much as anywhere it's a full-fledged recovery in Korea," said David Cohen, chief of Asian forecasting at Action Economics in Singapore. He termed "dramatic" the economy's turnaround from the depths it hit late last year as the global financial meltdown sapped Asia's fourth-largest economy.

The East Asian country — home to industrial powerhouses such as Samsung Electronics Co. and Hyundai Motor Co. — has been recovering from its worst downturn since the 1997-98 Asian financial crisis as a weaker currency and government stimulus programs overseas boost exports. A record-low benchmark interest rate of 2 percent and government spending at home have also helped stimulate growth.

Neighboring China's economy, the world's third largest, grew 8.9 percent in the third quarter from a year earlier, accelerating from an expansion of 7.9 percent in the second. Japan, the world's second-largest economy, grew at an annual pace of 2.3 percent in the second quarter, following a yearlong contraction. Japan has yet to release figures for the third quarter.

In South Korea, manufacturing expanded 8.7 percent in the third quarter, capital spending grew 8.9 percent, consumer spending — boosted by purchases of automobiles — gained 1.4 percent and exports of goods expanded 5.1 percent.