Korea: Economic growth gains momentum in Q1, expands at fastest pace in three years
April 24, 2014
In the first quarter, GDP expanded 3.9% over the same period last year. The expansion came in above the 3.7% increase tallied in the fourth quarter and was on par with market expectations. The reading represents the fastest pace of expansion since Q1 2011.
Q1's expansion was mainly driven by an improvement in the external sector. Exports of goods and services accelerated from a 3.2% increase in Q4 2013 to a 4.6% expansion in Q1. Conversely, imports decelerated from a 4.9% rise in Q4 to a 3.8% increase in Q1. The contribution of net exports to overall economic growth swung from minus 0.6 percentage points in Q4 to plus 0.6 percentage points in Q1.
Growth in domestic demand waned somewhat over the previous quarter, as fixed investment decelerated to a 6.2% increase in Q1 (Q4 2013: +7.8% year-on-year). In addition, government spending increased 2.7% in Q1, which came in below the 3.3% rise observed in Q4. Conversely, private consumption increased 2.6% in Q1, which was up from 2.2% rise tallied in Q4.
Sequential data showed that GDP increased a seasonally-adjusted 0.9% in Q1, which matched the growth rate registered in the previous quarter.
The Bank of Korea expects the economy to gain momentum in 2014 and expand 3.8%. In 2015, the Bank expects the economy to expand 4.0%. FocusEconomics Consensus Forecast panelists see the economy growing 3.5% in 2014, which is unchanged from last month's estimate. For 2015, the panel projects that the economy will expand 3.7%.
Author: Ricardo Aceves, Senior Economist