Korea: Growth moderates in second quarter
July 28, 2011
In the second quarter, GDP expanded 3.4% over the same period the previous year. The result represented a moderation compared to the 4.2% expansion recorded in the previous quarter and slightly undershot market analysts' expectations, which had the economy expanding 3.5% in the second quarter. The second quarter reading implied a moderation in the contribution to growth from the external sector, while domestic demand improved compared to the same period of the previous year. Total consumption increased 2.9% annually, up from the 2.5% rise recorded in the previous quarter. Both private consumption (Q1: +2.8%; Q2: +3.1%) and government consumption (Q1: +1.5%; Q2: +2.2%) improved compared to the previous three-month period, while fixed investment mirrored the result seen in Q1 and contracted 2.2%. Meanwhile, the net contribution from the external sector to overall growth dropped from 3.3 percentage points to plus 1.7 percentage points, as exports moderated notably in the second quarter. Exports of goods and services increased 10.2% annually (Q1: +16.8% yoy) while imports rose 7.9% (Q1: +10.8% yoy). A quarter-on-quarter comparison corroborates the moderation suggested by the annual data, as the economy expanded 0.84% over the previous quarter in seasonally adjusted terms, down from the 1.32% increase observed in the first quarter. That said, the Central Bank recently revised its growth forecast for this year down from 4.5% to the current 4.3%. Next year, the economy is expected to grow at a 4.6% clip, which is also down from a previously anticipated 4.8%.
Author: Armando Ciccarelli, Head of Data Solutions