Korea: Second GDP growth estimate confirms the solid start to the year
June 2, 2017
The economy performed even better than previously estimated in the first quarter of the year despite myriad economic and geopolitical challenges, according to a more comprehensive set of data released by the Bank of Korea in early June. GDP grew 2.9% from the same quarter of the previous year in Q1, slightly above both a first estimate of 2.7% growth and market expectations of a softer 2.6% increase. Likewise, GDP growth in seasonally adjusted quarterly terms was upgraded from 0.9% in the advance estimate to 1.1%, more than double Q4’s 0.5% expansion.
The upward revision largely stemmed from stronger fixed investment growth than first projected. Capital expenditure growth accelerated markedly in the first quarter on account of improving dynamics in the country’s exporting sectors, while construction investment soared due to robust public outlays and benign weather conditions. Fixed investment was thus revised up from the 9.5% increase reported previously to 10.4% in this month’s second estimate, which marks the best print in seven years and came in well above Q4’s 7.1% increase. Private consumption growth was unchanged from the advance estimate at 2.0% in Q1, a notable improvement from Q4’s 1.5% expansion. Government spending was also unchanged in this month’s estimate at 2.7% year-on-year growth, the slowest expansion in a year and a half and below Q4’s 3.6% rise.
On the external front, growth in both exports and imports was revised upwards. Stronger demand for Korean goods, particularly semiconductors, automobiles and petrochemicals, drove a pickup in export volumes, which accelerated to a nearly four-year high of 3.9% in Q1 (previously reported: +3.7% yoy; Q4: +1.2% yoy). Imports rose from 3.3% in Q4 to 9.9% in Q1 (previously reported: +9.4% yoy), which drove the contribution from net exports to the economy even deeper into negative territory. The external sector subtracted 3.0 percentage points from overall growth in Q1, which followed the 2.7 percentage-point subtraction previously reported and Q4’s 1.0 percentage-point drag.
Author: David Ampudia, Economist