GDP in Korea
Korea - GDP
Strong investment and exports growth reignite Korean economy
The Korean economy kicked into higher gear after sluggish growth in the second half of 2016, shrugging off concerns of an economic fallout following months of domestic political turmoil. GDP surprised to the upside and rose 2.7% annually in Q1—markets had expected a milder 2.6% increase—which came in above the 2.4% recorded in the previous quarter. A quarter-on-quarter comparison also highlighted the pickup in economic activity. GDP rose 0.9% in seasonally-adjusted quarterly terms in Q1, almost doubling the 0.5% expansion logged in Q4. Strong exports and capital investment helped put the economy on a solid footing at a time when policymakers are facing myriad economic and geopolitical challenges.
The economy’s resilience stemmed from better performances in the manufacturing and exporting sectors. Improved dynamics on the back of newfound overseas demand fueled a surge in capital outlays, with fixed investment growing at the fastest pace since March 2010 (Q1 2017: +9.5% year-on-year; Q4 2016: +7.1% yoy). Investment also soared in the construction sector as it benefited from benign weather and increased public infrastructure spending. Gains in private consumption, albeit existent—household consumption accelerated from a 1.5% increase in Q4 to a 2.0% expansion in Q1—remained subpar due to downbeat sentiment among consumers and concerns over high levels of household debt. Government consumption, after having bolstered growth in H2 2016, took a backseat this time around and grew at its slowest pace in a year and a half.
On the external front, improved demand for Korean products, particularly semiconductors, automobiles and petrochemicals, drove a pickup in export volumes, which accelerated to a nearly four-year high of 3.7% in Q1 (Q4 2016: +1.2% yoy). Nonetheless, the increase in exports was outstripped by even higher growth in import volumes. Imports rose from 3.3% in Q4 to 9.4% in Q1, thus driving the contribution from net exports to the economy deeper into negative territory. The external sector subtracted 2.7 percentage points from overall GDP in Q1, following the 1.0 percentage-point drag in Q4.
Government officials may decide not to roll out an additional budget this year as the economy seems to be firming up. The robust start to the year will provide a much-needed boon for policymakers as the country prepares to elect a new president in May amid mounting geopolitical turmoil in the Korean peninsula.
The Central Bank revised its 2017 GDP growth forecast and now expects the economy to increase 2.6% in 2017, which is higher than its previous 2.5% forecast. For 2018, the Bank expects the economy grow 2.9%. The analysts we surveyed this month are somewhat more pessimistic than the Central Bank and foresee the economy growing 2.4% in 2017, which is unchanged from last month’s estimate. For 2018, the panel projects economic growth to inch up to 2.6%.
Korea - GDP Data
|Economic Growth (GDP, annual variation in %)||3.7||2.3||2.9||3.3||2.8|
5 years of economic forecasts for more than 30 economic indicators.
Korea GDP Chart
Source: Bank of Korea and FocusEconomics calculations.
|Bond Yield||2.27||0.89 %||May 24|
|Exchange Rate||1,126||0.20 %||May 24|
|Stock Market||2,317||0.24 %||May 24|
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May 21, 2017
On 10 May, Moon Jae-in was sworn in as President of Korea after winning the snap elections held the previous day.
May 2, 2017
Consumer prices decreased 0.1% in April compared to the previous month, which followed muted growth in March and marked the lowest reading in five months.
May 2, 2017
Korea’s manufacturing economy improved in April despite reports of subdued demand from China related to an ongoing diplomatic row over the deployment of a U.S. anti-missile system on Korean soil.
April 30, 2017
The Korean external sector continues to show outstanding resilience to mounting geopolitical tensions in the peninsula.
April 28, 2017
The Bank of Korea’s forward-looking business confidence indicator (BSI) for the manufacturing sector inched up from 82 points in April to 84 points in May—the highest reading since May 2014.