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South Korea posts glowing data on output, current account

South Korea's industrial output grew at its quickest pace in more than four years in December and the country logged a record current account surplus last year, a sign the economy stepped into 2014 with strong momentum.

Industrial output grew by a seasonally adjusted 3.4 percent in December from the previous month, Statistics Korea said on Wednesday, the strongest growth since June 2009, and blew past all individual forecasts in a Reuters survey of economists.

(Read more: South Korea's growth figures show recovery intact)

Separately, the Bank of Korea said the country's seasonally adjusted current account surplus last month nearly doubled to a record $8.07 billion in December from November, with the full-year surplus up 47.1 percent to $70.73 billion, broadly in line with the central bank's forecast.

Yeouido finance district in Seoul, South Korea.
Getty Images
Yeouido finance district in Seoul, South Korea.

The data suggest that South Korea's economic fundamentals remained sound heading into the new year, with policymakers expecting annual gross domestic product growth at slightly below 4 percent in 2014 from an estimated 2.8 percent growth in 2013.

"The firm December output data could lead to some upward revision in the fourth quarter growth estimates," said Hyundai Securities economist Lee Sang-jae, referring to the central bank's projection of a seasonally adjusted 0.9 percent gross domestic product growth in the fourth quarter from the previous three months.

"The data as a whole shows that the Korean economy remains on a trajectory to record growth somewhere in the high 3 percent range this year."

(Read more: South Korea ramps up forex reserves to record high)

South Korea's export trade is a key pillar of the economy, as the country is home to some of the world's biggest manufacturers of cars, ships and smartphones. Overseas shipments, which have seen a gradual improvement, heavily influence the country's current account balance and industrial output.

The current account is the broadest measure of a country's trade with other nations and a surplus results when receipts from exports and financial transfers exceed spending on imports of goods and services and money transfers.

Analysts expect exports to do the heavy lifting for Asia's fourth-largest economy this year, though domestic demand is also seen picking up thanks to continued jobs growth and generally robust industrial activity.

Though the U.S. Federal Reserve's scaling back of its bond-buying stimulus has been a source of market unrest this month, Seoul believes it will ultimately benefit from the economic recovery that has prompted the taper.

(Read more: South Korea central bank cuts growth outlook, eyes US impasse)

The strong current account surplus has recently emerged as a concern as it has contributed to the won's rapid appreciation in the latter half of last year. As the currency grew stronger, some key local industries warned that their price competitiveness against Japanese rivals suffered as the yen continued to fall.

The central bank is now expecting the current account surplus to shrink to $55 billion, due in part to an expected increase in imports stemming from stronger private consumption and corporate investment.

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