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Korea GDP Q3 2018

Korea: Comprehensive data shows that the economy lost growth momentum in Q3

According to comprehensive data released by the Bank of Korea on 4 December, GDP increased 2.0% in the third quarter from the same quarter last year. This matched the preliminary reading released in October but was still significantly down from the 2.8% expansion in the second quarter. In quarter-on-quarter seasonally-adjusted terms, there was a 0.6% increase in GDP in Q3, which matched both the preliminary reading and Q2’s growth rate.

Annual private consumption growth in Q3 was put at 2.5%, down from both the preliminary reading of 2.6% and the previous quarter’s increase of 2.8%. This was likely in part due to falling consumer confidence. Government consumption rose a revised 4.6% in the third quarter (previously reported: +4.7% year-on-year, Q2: +4.8% yoy). Meanwhile, fixed investment fell a revised 6.6% in Q3, below both the preliminary reading of minus 6.5% and Q2’s decrease of 1.3%. The poor investment performance in Q3 was largely due to a slump in spending on construction and business investment.

Exports of goods and services increased 3.1% in Q3, which matched the preliminary reading but came in below the 4.8% rise in Q2. Imports fell a revised 1.8% in Q3, down from the 1.2% fall previously reported and the 2.0% increase in Q2. Overall, the external sector contributed a revised 2.6 percentage-points to economic growth in Q3, up from the previously reported 2.3 percentage-point contribution and the 1.5 percentage-point contribution in Q2.

Looking ahead, the economy is forecast to grow at a broadly steady rate. Higher government spending is on the cards as outlined by the Moon administration’s budget for 2019, which sets out the largest government spending increase in a decade. Moreover, monetary policy will remain accommodative by historical standards. However, elevated household debt, trade protectionism and an economic slowdown in China all weigh on the outlook.

Korea GDP Forecast

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