Korea: The economy maintained its growth momentum in Q1 2018
June 1, 2018
According to comprehensive data released by the Bank of Korea (BOK) on 1 June, GDP increased 2.8% in Q1 2018 from the same quarter in 2017. This matched the rate of expansion in Q4 2017—confirming sustained growth momentum early this year—and was unchanged from a preliminary estimate released by the BOK on 28 March. In seasonally-adjusted terms, there was a 1.0% expansion in Q1 compared to the previous quarter (previously reported: +1.1% quarter-on-quarter), which contrasted the 0.2% contraction in Q4.
While consumers remained broadly confident about the economy in the first three months of 2018, optimism fell compared to Q4 2017, and unemployment increased. Despite this, private consumption growth accelerated to a revised 3.5% in Q1 (previously reported: +3.4% year-on-year) from 3.4% in Q4. Government consumption grew a revised 5.8% in Q1 (previously reported: +6.1% yoy) amid increased public healthcare spending (Q4: +4.1% yoy). Meanwhile, fixed investment expanded a revised 3.7% in Q1 (previously reported: +4.7% yoy), representing a slowdown from 5.0% in Q4.
On the external front, exports of goods and services were confirmed to have grown 1.6% year-on-year in Q1, matching the preliminary estimate and representing an upward swing from the 0.6% contraction in Q4. Services exports increased strongly in Q1, probably on the back of tourism activity from the PyeongChang Olympic Winter Games and subsequent Paralympics, in addition to a pick-up in tourism from China. Moreover, strong shipments of semiconductors supported merchandise exports. Imports, meanwhile, increased 4.2% in Q1 (previously reported: +4.7% yoy), up from 4.1% in Q4. Overall, the external sector detracted 1.4 percentage-points from economic growth in Q1 (previously reported: -1.7 percentage points), less than the 2.4 percentage-point deduction in Q4.
Korea GDP Forecast
The Central Bank expects the economy to grow 3.0% in 2018 and 2.9% in 2019. The analysts surveyed by FocusEconomics this month also see growth of 2.9% in 2018, which is unchanged from last month’s estimate, and 2.9% growth in 2019.
Author: Edward Gardner, Economist