GDP in Korea

Korea - GDP

GDP growth moderates in the third quarter

According to a preliminary reading, GDP growth slowed markedly to 4.0% year-on-year in the third quarter from 6.0% in the second quarter, due to a less favorable base effect and higher Covid-19 infection rates.

The slowdown was driven by weakening private consumption, fixed investment and exports. Household spending increased 3.2% in the third quarter, which was below the second quarter's 3.7% expansion, as lower consumer confidence amid tighter Covid-19 restrictions outweighed the impact of a declining unemployment rate. Meanwhile, fixed investment growth fell to 1.8% in Q3, marking the worst result since Q4 2020 (Q2: +3.8% yoy). Contrastingly, public spending improved to a 6.3% increase in Q3 (Q2: +5.3% yoy).

On the external front, growth in exports of goods and services waned to 6.9% in Q3 (Q2: +22.4% yoy), largely due to a fading base effect. In addition, growth in imports of goods and services slowed to 6.7% in Q3 (Q2: +13.7% yoy).

On a seasonally-adjusted quarter-on-quarter basis, economic growth slowed to 0.3% in Q3 following the previous quarter's 0.8% expansion. Q3's reading marked the softest expansion since Q2 2020.

On the outlook, Jeong Woo Park, economist at Nomura, commented:

“The global shift to living with COVID-19 and some signs of easing lockdown measures in southeast Asian economies should benefit Korea’s export growth in Q4, as supply bottlenecks partially ease. Moreover, as the government is also planning to adopt a new health strategy (living with corona), once vaccination rates reach its 70% target, we expect consumption to pick up, making up for Q3 losses.”

FocusEconomics panelists see the economy growing 3.1% in 2022, which is up 0.1 percentage points from last month’s forecast. For 2023, they see the economy growing 2.6%.