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Korea GDP Q4 2020

Korea: Economy contracts at sharper pace in final quarter of 2020

According to a preliminary estimate, GDP dropped at a quicker rate of 1.4% year-on-year in the final quarter of 2020, compared to the 1.1% contraction tallied in the third quarter.

Private consumption led the deterioration, falling 6.6% in Q4 and marking the steepest decline since Q4 1998 (Q3: -4.4% yoy). Household spending was likely suppressed by the gradual tightening of restrictions that began in mid-November. Meanwhile, public consumption grew at the slowest pace since Q4 2011, expanding 2.3% (Q3: +4.6% yoy). Fixed investment grew at a slower rate of 1.2% in Q4, marking the worst reading since Q3 2019 (Q3: +3.2% yoy).

Exports of goods and services bounced back in the fourth quarter, growing 1.0% year-on-year and marking the best reading since Q1 2020 (Q3: -3.4% yoy), as higher demand for IT products boosted merchandise exports. In addition, imports of goods and services declined at a more moderate rate of 3.0% in Q4 (Q3: -4.6% yoy).

On a seasonally-adjusted quarter-on-quarter basis, economic growth moderated to 1.1% in Q4 from the previous quarter’s 2.1% increase.

In Q4, strong exports and resilient investment were offset by sluggish private consumption. Looking at the first quarter of the new year, although some recovery is expected, an unfavorable base effect and lingering restrictions should keep growth subdued.

Commenting on the near-term outlook, Jeong Woo Park, Korea economist at Nomura, noted:

“With export growth set to accelerate, we believe growth momentum should improve in coming months, driven by a rebound in private consumption on more stimulus and robust consumer confidence.”

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