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Korea: Economic growth decelerates further in Q3

October 27, 2014

In the third quarter, GDP expanded 3.2% over the same period last year. The expansion came in below the 3.5% increase registered in the second quarter and fell short of the 3.3% increase that markets had expected. Q3’s result marked the weakest expansion since Q2 2013.

The slowdown in economic activity was the result of a deterioration in the external sector, since the rest of the demand components performed better than in Q2. Total consumption grew 2.0% annually in Q3 (Q2: +1.5% year-on-year), prompted by a slight improvement in private consumption (Q3: +1.6% yoy; Q2: +1.5% yoy) and significantly higher government spending (Q3: +3.4% yoy; Q2: +1.7% yoy). In addition, gross fixed investment increased 3.7% in Q3, which came in above the 3.4% expansion observed in Q2.

On the external front, growth in exports of goods and services fell from 3.7% in Q2 to 2.1% in Q3. Imports also decelerated, but at a much slower rate than exports (Q3: +2.5% yoy; Q2: +2.7% yoy). As a result, the external sector’s net contribution to overall economic growth fell from plus 0.8 percentage points in Q2 to minus 0.1 percentage points in Q3.

A quarter-on-quarter comparison showed that GDP increased a seasonally-adjusted 0.9% in Q3, which was up from the 0.5% increase tallied in Q2.

In October, the Central Bank cut its growth forecasts for this year from 3.8% to 3.5%. For 2015, the Bank sees economic growth picking up to 3.9%, which is down from its previous estimate of 4.0%. FocusEconomics Consensus Forecast panelists foresee the economy growing 3.6% this year, which is unchanged from last month’s estimate. For 2015, the panel projects that the economy will expand 3.8%, which is also unchanged from last month.


Author:, Economist

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Korea GDP Q3 2014 0

Note: Year-on-year changes of GDP in %.
Source: KOSTAT-KOSIS and FocusEconomics Consensus Forecast.


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