S. Korea’s GDP ekes out 0.3% gain Q3, income off 1.3% on poorer trade, FX terms

[Photo by Lee Seung-hwan]

South Korea managed to eke out a marginal growth of 0.3 percent in the July-September period against the previous quarter as increased private and corporate spending helped to offset worsening revenue from trade that fuels the economy.

According to the Bank of Korea’s guidance for July-September gross domestic product (GDP) on Thursday, the country’s real GDP is projected to have added 0.3 percent on quarter, but the pace slowed from gains of 0.7 percent and 0.6 percent in the previous two quarters.

Against a year ago, real GDP increased by 3.1 percent in the July-September period, up from 2.9 percent on-year growth in the second quarter. When maintaining the pace in positive territory, the economy could finish the year at the central bank's annual growth target of 2.6 percent.

Markets were relieved. The Kospi and Kosdaq opened Thursday 0.6 percent higher from previous close. The U.S. dollar was 5 won lower at 1,415 won.

Private consumption rose 1.9 percent on quarter in the third quarter on increased spending in semi-durable goods like automobiles and restaurant and accommodation facilities, helped by full business normalization after virus-related restrictions.

Facility investment added 5.0 percent on a spending rise in machinery such as chip equipment and transportation equipment. Construction investment edged up 0.4 percent on quarter on increased construction of non-residential buildings.

Government spending added just 0.2 percent in the third quarter, mainly on spending in materials, as the government moves towards fiscal tightening.

Exports rose 1.0 percent in the third quarter from the previous three months thanks to strong demand for transportation equipment and services despite sluggish chip demand to rebound from a 3.1 percent fall in the second quarter.

Imports grew much bigger at 5.8 percent due to costlier shipments of crude oil, machinery and equipment.

Private spending and facility investment contributed 0.9 percentage point and 0.4 percentage point, respectively, to the third-quarter GDP growth. Net exports, however, pulled down growth by 1.8 percentage points, as widening trade deficit weighed over the economy.

In output, agriculture, forestry, and fishing, construction, and service grew by 5.5 percent, 1.8 percent, and 0.7 percent each. In services, culture and other services expanded by 3.3 percent, finance and insurance 2.3 percent, and wholesale and retail trade 2.2 percent, data showed.

Manufacturing, however, contracted 1.0 percent, as computer, electronic and optical products and chemical products decreased due to weaker external demand.

The country’s gross domestic income fell 1.3 percent on quarter and 1.9 percent on year, extending the negative territory for the second quarter, due to worsened trade terms and weaker Korean won versus the U.S. dollar.

[Provided by Bank of Korea]

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