Korea: Economic growth accelerates in Q2
July 24, 2013
In the second quarter, GDP expanded 2.3% over the same period last year. The reading was well above the 1.5% increase observed in the previous quarter and overshot market expectations of 2.0% growth. The quarterly reading mainly reflected a strong improvement in domestic demand.
Private consumption increased 1.7% annually in Q2, above the 1.5% rise recorded in the previous quarter. Similarly, government spending improved over the second quarter (Q1: +1.3% year-on-year; Q2: +3.9% yoy), following the stimulus program unveiled in April. Gross fixed investment rose 2.7% over the same quarter last year, contrasting the 3.8% fall in the first quarter.
The external sector's net contribution to overall growth dropped from 1.0 percentage points in Q1 to 0.8 percentage points in Q2, as imports outpaced exports. Exports of goods and services increased 5.3% annually (Q1: +3.4% yoy), while imports rose 4.6% (Q1: +1.8% yoy).
A quarter-on-quarter comparison corroborates an overall improvement in economic activity. The economy expanded 1.1% over the previous quarter in seasonally adjusted terms, faster than the 0.8% expansion recorded in the fourth quarter and the fastest quarter-on-quarter pace in over two years.
The Bank of Korea's revised forecast in July sees the economy growing 2.8% this year (previous forecast: +2.6%) and accelerating to a 4.0% expansion in 2014 (previous forecast: +3.8%). FocusEconomics Consensus Forecast panellists are slightly more optimistic than the Central Bank. They see the economy growing 2.9% this year, which is down 0.1 percentage points from last month's estimate. For 2014, the panel projects the economy to expand 4.0%.