GDP in Korea

Korea - GDP

Second GDP growth estimate confirms economy’s resilient performance in Q2

The economy’s performance stood resilient at a 2.7% year-on-year expansion in the second quarter, more comprehensive data released by the Bank of Korea in early September showed. The reading was kept unchanged from a first estimate released in late July and came slightly below the 2.9% increase recorded in the first quarter. Likewise, growth in seasonally-adjusted quarterly terms was confirmed at 0.6% in Q2, well below Q1’s 1.1% expansion.

Revisions to data were of little significance, but confirmed the economy’s resilient performance in the face of economic and geopolitical challenges. Private consumption growth was revised slightly upwards to a 2.3% expansion in annual terms in Q2 (previously estimated: +2.2% year-on-year; Q1: +2.0% yoy), which showcased households’ improved sentiment on the economy and their personal finances. Conversely, government consumption growth was slightly downgraded by one-tenth of a percentage, to 3.1%, in Q2, which was nonetheless a better reading than Q1’s 2.7% increase. Fixed investment growth was also revised down by four-tenths of a percentage but at 11.6% growth still marked a very healthy reading (Q1: 11.7% yoy).

Similarly, the external sector only experienced minor revisions. Goods and services export growth stagnated in the second quarter (Q1: 3.9% yoy), which contrasted the 0.1% contraction initially estimated and reflected the plunge in tourist arrivals caused by continuing political tension between China and Korea over the THAAD missile system. It is important to mention that while the value of merchandise exports posted double-digit rates of growth through Q2, GDP is calculated using production data and thus does not reflect price-related gains in sales abroad. Import growth was also revised down one-tenth of a percentage point to 6.4%, which was below Q1’s 9.9% increase. The external sector subtracted 3.1 percentage points from overall growth in Q2, which followed Q1’s 3.0 percentage-point drag.

The Central Bank now expects the economy to increase 2.8% in 2017, which is higher than its previous 2.6% forecast. For 2018, the Bank expects the economy grow 2.9%. The analysts we surveyed this month are somewhat more pessimistic than the Central Bank and foresee the economy growing 2.7% in 2017, which is unchanged from last month’s estimate. For 2018, the panel projects that economic growth will inch down to 2.6%.