SKorea's economy accelerates in 4Q

SEOUL, South Korea - South Korea's economic growth accelerated in the fourth quarter on strength in exports and manufacturing, the Bank of Korea said Friday, with economists expressing optimism the country can weather a possible global slowdown.

Gross domestic product expanded 5.5 percent in the October-December quarter compared with the same period in 2006 and outpaced the third quarter's 5.2 percent growth, the central bank said.

The preliminary results beat the central bank's own forecast of a 5 percent expansion as well as the 5.4 percent average of economists surveyed by Dow Jones Newswires.

For all of 2007, the economy grew 4.9 percent, slightly below the 5 percent recorded in 2006.

Citibank economist Oh Suk-tae said that while South Korea's economy was unlikely to match the fourth quarter's rapid pace into this year, any weakening would be moderate.

"We don't expect any big or significant slowdown in Korea's growth," Oh said, adding that as long as the expansion stays above 4 percent the Bank of Korea was unlikely to cut its key interest rate, which stands at 5 percent.

But Lim Ji-won, senior economist at JP Morgan in Seoul, cautioned that much of the strength in the fourth quarter was concentrated in October and November and may not reflect the possible impact on the South Korean and global economy of slower demand from the U.S., which some believe is sliding into a recession.

She said that South Korea has reduced export dependence on the U.S. over the past five years while relying more on demand in neighboring China, the country's largest trading partner.

"But it's an open question how far China can go if the U.S. falls into recession," she said.

China is the destination for about 22 percent of the country's exports, while the U.S. takes 13 percent, said Citibank's Oh.

South Korean exports, which rose 16 percent in the quarter, were led by shipments of industrial machinery and mobile phones, the central bank said. The manufacturing sector grew 9.3 percent, led by gains in semiconductors and other goods.

Samsung Electronics Co., the world's second-largest mobile phone maker, and LG Electronics Inc., the fifth-largest, both reported record handset sales in the fourth quarter.

South Korea is also home to the world's two largest computer memory chip makers, Samsung and Hynix Semiconductor Inc.

Goldman Sachs said in a report that it did not expect any major slowdown in exports as "diversification to developing countries and oil producers will likely continue to support headline export growth despite a slowing U.S."

South Korea's economy, the world's 12th-largest, also expanded at a seasonally adjusted 1.5 percent in the fourth quarter from the previous three months, also beating expectations.

That comes to an annualized rate of 6.3 percent, Oh at Citibank said. The Bank of Korea does not provide an annualized figure.

China, closing in on Germany to be the world's third-largest economy, announced Thursday that its economy expanded 11.2 percent in the fourth quarter, saying fast growth should continue.