Korea: Economic growth slows on the back of weaker external sector
May 15, 2012
In the first quarter, GDP expanded 2.8% over the same period the previous year. The reading was below the 3.3% increase tallied in the previous quarter but matched market expectations. The quarterly reading reflected a moderation in the contribution from the external sector to overall growth, while domestic demand improved somewhat. Total consumption increased 2.2% annually in Q1, up from the 1.3% rise recorded in the previous quarter, as both private and government consumption strengthened over the previous quarter. In addition, gross fixed investment rebounded from a 1.8% contraction in the fourth quarter to a 5.1% expansion in the first. Meanwhile, the external sector's net contribution to overall growth fell from plus 1.6 percentage points in Q4 to plus 0.5 percentage points in Q1, as imports accelerated more than exports. Exports of goods and services increased 5.0% annually (Q4: +4.4% yoy), while imports rose 4.6% (Q4: +1.6% yoy). A quarter-on-quarter comparison, however, suggests stronger growth than the annual data, partially due to a base effect. The economy expanded 0.91% over the previous quarter in seasonally adjusted terms, nearly tripling the weak 0.33% expansion in the fourth quarter. The Bank of Korea expects the economy to grow 3.5% this year and to accelerate to a 4.2% expansion in 2013.