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Seoul: South Korea's April exports and inflation rose more than expected and at their fastest annual pace in more than three years, but analysts said the economy faces risks so the central bank would cut interest rates.
April exports rose 27.0 per cent from a year earlier on solid demand from emerging economies, marking the fastest pace since a 28.8 per cent annual rise in August 2004. The rise was also above a market forecast for a 22.0 per cent gain.
April's consumer prices rose 4.1 per cent from a year earlier, the fastest price growth since a 4.8 per cent increase in August 2004, keeping the rate of inflation above the Bank of Korea's target for the fifth month in a row.
"Export and inflation data, along with yesterday's factory output figures, indicated that the country did not need an interest rate cut yet," said Kim Jae-eun, an economist at Hana Daetoo Securities.
"However, the Bank of Korea may lower rates once or twice as a pre-emptive step to prevent an economic slowdown and to coordinate with the government," she said.
On Wednesday, government data showed industrial output of Asia's fourth-largest economy rose in March from February, when a decline had been expected.
Like other Asian exporters, South Korea expects growth to be hit in 2008 by the slowdown in the United States. A Reuters poll in March forecast growth this year would slow to a three-year low of 4.8 per cent.
Government officials have made several warnings about slowing growth, some calling for lower interest rates, after gross domestic product grew in the first quarter at its slowest pace in three years.
Vice Finance Minister Choi Joon-kyung said earlier yesterday that the country could meet its six per cent growth target - which analysts say is too ambitious - with policy measures. "The six per cent target is still valid. Despite various difficult conditions, we can achieve the 6 per cent target with many policies," Choi said on local SBS radio.
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