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Korea: Economic growth decelerates further in Q4

January 23, 2015

In the fourth quarter, GDP expanded 2.7% over the same period of the previous year. The expansion came in below the 3.2% increase registered in the third quarter and was slightly below the 2.8% rise that the markets had expected. Q4’s result marked the weakest expansion since Q2 2013.

The slowdown in economic activity was mainly due to a strong deterioration in both export growth and investment. On the domestic front, private consumption decelerated slightly from a 1.5% increase in Q3 to 1.4% in Q4, while government spending slowed from a 3.5% growth in Q3 to a 3.1% rise in Q4. The component that deteriorated the most was fixed investment, which expanded a mild 0.9% in the fourth quarter of the year, well below the 3.6% increase tallied in Q3.

On the external front, growth in exports of goods and services fell sharply from 2.5% in Q3 to 0.8% in Q4, which marked the weakest increase in more than five years. Imports swung from a 2.7% expansion in Q3 to a 0.8% decline in Q4. As a result, and despite the slowdown in exports, the external sector’s net contribution to overall economic growth edged up from 0.1 percentage points in Q3 to 0.9 percentage points in Q4.

In the full year 2014, the Korean economy grew 3.3% over the previous year, which was just above the 3.0% expansion registered in 2013. Despite this moderate improvement, the gradual deceleration of the economy throughout 2014 led the Bank of Korea to cut its GDP growth forecast for 2015 from the 3.9% predicted in October to 3.4% in January.

The Bank of Korea sees the economy growing 3.4% in 2015 and 3.7% in 2016. FocusEconomics Consensus Forecast panelists foresee the economy growing 3.6% this year, which is unchanged from last month’s estimate. For 2016, the panel projects that the economy will expand 3.6% as well.


Author:, Economist

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Korea GDP Q4 2014

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


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