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.
Author: Cecilia Simkievich, Economist