South Korea’s Q3 GDP growth slows

SEOUL: South Korea’s economic growth slowed more than expected in the third quarter, and though exports showed some signs of recovery the overall outlook was clouded by a domestic spending slump and intensifying global trade frictions.

The trade-reliant economy has been among those worst-hit by cooling global demand as a prolonged US-China tariff war disrupted world supply chains in a blow to business confidence and investment. A months-long trade spat with Japan has also added to strains on Korean exporters.

The Bank of Korea’s advance estimates yesterday showed the economy grew 0.4% during the July-September period on-quarter, down from a 1.0% rise in the second quarter and just missing a 0.5% gain forecast in a Reuters survey of 26 economists.

Exports rose 4.1% in the third quarter after a 2% gain in the second quarter, which reversed a successive run of contractions for two quarters. But private consumption grew just 0.1% and construction spending tumbled 5.2%.

Economists said exports, the most important driver of growth for Asia’s fourth-largest economy, appeared to have clearly passed the trough, although a sure-footed recovery in the economy would require more policy support.

Over a year earlier, the economy grew 2%, bringing the average for the January-September period at 1.9%, down from a 2.6% gain for the same 2018 period and compared with the central bank’s 2.2% growth projection for the whole of this year.

South Korea’s GDP growth is forecast around 2% for the whole of this year, the latest Reuters poll showed, well below the 2.7% pace in 2018 and marking the worst in several decades excluding global or regional crisishit years.

The government has responded with an extra $5 billion stimulus plan while the central bank has trimmed policy interest rate twice in three months to 1.25%, matching a record low seen until late 2017.

The Bank of Korea has left the door open to further easing although another cut is not expected soon. The next policy meeting, the last of 2019, is on Nov 29.

On Tuesday, President Moon Jae-in urged the parliament to approve the government’s budget bill for next year, which proposes a 9.3% increase in spending from this year, saying it was time for fiscal policy to play the leading role.