GDP in Korea

Korea GDP | Economic News & Forecasts

Korea - GDP

Economic growth plunges to a near-decade low

According to preliminary data released by the Bank of Korea, the economy grew 1.8% in the first quarter compared to the same quarter a year earlier. This was significantly down from the 3.1% expansion registered in the fourth quarter of last year, weighed on mainly by a notable contraction in gross fixed capital formation and a slowdown in final consumption expenditure growth. In seasonally-adjusted terms, the economy shrank 0.3% in Q1 compared to the previous quarter, contrasting the 1.0% expansion in Q4. All growth figures were worse than market analysts’ expectations.

The worst performer in the first quarter was fixed investment, which posted the sharpest contraction in almost a decade (Q1: -8.4% year-on-year; Q4: -3.8% yoy). Meanwhile, private consumption growth softened to 1.9% in Q1 (Q4: +2.5% yoy), likely the result of an uptick in the unemployment rate and pessimism among consumers. Government consumption growth also slowed, though remained robust at 5.2% (Q4: +7.1% yoy).

Growth in exports of goods and services slumped to a scant 0.2% in Q1, down from the 7.2% rise clocked in Q4. Imports meanwhile fell 5.4% in Q1, contrasting the 2.5% expansion logged in Q4. Consequently, the external sector contributed 3.1 percentage points to economic growth in Q1, up from the 2.5 percentage-point contribution in Q4.

Looking ahead, growth will likely be moderate, as external pressures—chiefly a synchronized global slowdown in demand for technology and the U.S.-Sino trade spat—continue to weigh on exports. The government plans to help boost the economy with a supplementary budget, which is currently awaiting parliamentary approval. However, the stimulus may not be as impactful as the government desires. Chief economist at ING, Robert Carnell, noted, “The government has a KRW 6.7tr stimulus package ready for implementation. They say it could be worth 0.1pp of GDP. That seems about twice as much as is likely”.

The BoK may also add monetary stimulus to keep the economy afloat. Analyst Young Sun Kwon from Nomura argues, “We believe policymakers will coordinate macro policies and thus maintain our out-of-consensus call that the Bank of Korea (BOK) will deliver two 25bp policy rate cuts to 1.25% within 12 months”.

The Central Bank expects the economy to grow 2.5% in 2019. The analysts surveyed by Met the why particular this month expect an expansion of 2.5% in 2019, which is unchanged from last month’s estimate. For 2020, our panel sees an expansion of 2.4%.

Korea - GDP Data

2013  2014  2015  2016  2017  
Economic Growth (GDP, annual variation in %)2.9  3.3  2.8  2.9  3.1  

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Korea GDP Chart

Korea GDP
Note: Annual variation of gross domestic product (GDP) in %.
Source: Bank of Korea and Met the why particular calculations.

Korea Facts

Bond Yield1.871.55 %May 13
Exchange Rate1,1880.21 %May 13
Stock Market2,079-0.11 %May 13

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