SEOUL- South Korea’s economic growth is expected to have weakened in the third quarter, as high borrowing costs weighed on consumer spending and exports recovered at a slow pace, a Reuters survey showed, pointing to a challenging last few months of 2023.
Gross domestic product (GDP) for the July-September period is projected to have grown 0.5 percent quarter-on-quarter on a seasonally adjusted basis, according to the median forecast of 25 economists in the survey conducted Oct. 18-23.
That compares with the 0.6 percent expansion in the second quarter, which was the fastest rate in a year and largely driven by net exports contribution which economists said would also underpin the September quarter.
South Korea’s exports are slowly turning a corner, with the mildest fall in shipments seen last month in a yearlong downturn. Overall, however, the fragile global outlook remains a drag on offshore demand and on Asia’s fourth-largest economy whose 2023 growth is set to be its slowest in three years.
Worryingly, the downturn in private consumption is expected to have deepened last quarter as high interest rates hurt spending.
“The construction sector rebounded in the third quarter with the government easing property regulations and the manufacturing sector expanded on a recovery of the IT industry cycle, but the services sector remained weak due to high interest rates and inflation,” said Ha Keon-hyeong, an economist at Shinhan Securities.
South Korea’s key policy rate is currently at a near 15-year high of 3.5 percent with the central bank last week standing pat for the sixth meeting. However, policymakers retained a tightening bias and warned of inflationary risks from the Israel-Hamas conflict and global oil prices. – Reuters