By Jihoon Lee
SEOUL- South Korea’s economy barely grew in the third quarter as consumer spending showed signs of recovery but exports declined, raising the chances for more stimulus to support growth.
That prompted the central bank to warn of a potential downgrade to its 2024 growth forecast, while the finance minister called for response measures to confront the slowdown.
Gross domestic product in the July-September quarter expanded a seasonally adjusted 0.1 percent from a quarter earlier, the Bank of Korea’s (BOK) advance estimates showed on Thursday, lower than market expectations.
The weak growth is a setback for Asia’s fourth-largest economy and could exert pressure on the won which has weakened nearly 5 percent against the dollar this month, as the central bank’s full-year estimate had already been lowered.
“Weaker-than-expected economic growth data could raise the odds for the front-loading of rate cutting cycle, such as a back-to-back cut in November,” said Kim Jin-wook, an economist at Citi. “However, we believe, BOK could maintain a ‘wait-and-see’ mode for a while considering a recent surge of USD/KRW levels.”
The third-quarter growth rate was far weaker than an increase of 0.5 percent tipped in a Reuters poll of economists and expected by the central bank in its quarterly forecasts provided in August.
Private consumption rose 0.5 percent, after falling 0.2 percent a quarter earlier. Construction investment dropped 2.8 percent, while corporate investment jumped 6.9 percent.
Exports fell 0.4 percent, down for the first time since the final quarter of 2022, while imports rose 1.5 percent, bringing a net negative contribution.
“It is clear that the momentum of exports, which had been supporting the economy, has weakened, while it is too early to say domestic demand is recovering,” said Park Sang-hyun, an economist at iM Securities. – Reuters
