Korea: GDP growth slows in third quarter
October 27, 2010
In the third quarter, gross domestic product (GDP) expanded 4.5% over the same period last year. The result was down from the 7.2% expansion recorded in the previous quarter but was broadly in line with market expectations, which saw the economy expanding 4.4% in the third quarter. The deceleration over the previous quarter was driven by a deterioration in the domestic sector, while the contribution of the external sector improved slightly compared to the last quarter. Total consumption increased 3.2% annually, down from the 3.6% rise recorded in the previous quarter, as both private consumption (Q2 2010: +3.7% yoy; Q3 2010: +3.3% yoy) and government spending (Q2 2010: +3.2% yoy; Q3 2010: +2.9% yoy) decelerated over the second quarter. That said, gross fixed investment grew 7.0% annually, which was up from the 6.4% expansion recorded in the second quarter. Meanwhile, the net contribution from the external sector to overall growth stepped up from minus 0.7 percentage points to minus 0.6 percentage points, as exports slowed less than imports. Exports of goods and services increased 11.3% annually (Q2: +14.1% yoy) while imports rose 15.0% (Q2: +19.3% yoy). A quarter-on-quarter comparison corroborates the deceleration suggested by the annual data, as the economy expanded 0.75% over the previous quarter in seasonally adjusted terms, which virtually halved the 1.43% increase observed in the second quarter. The Central Bank raised its forecast for the year from its July's 5.9% estimate and now expects the economy to grow 6.0% in 2010.
Author: Armando Ciccarelli, Head of Data Solutions