Eurozone crisis slows South Korea’s economy growth to 0.2%
Increase in South Korea’s economy has not been so low since fourth quarter of 2009. Despite increased private consumption and export growth since second quarter, the country’s GDP was affected by slowing facility investment.
South Korea’s gross domestic product (GPD) has grown 0.2% from the previous quarter, but there is a general decline from a 0.9% growth in the first quarter and a 0.3% growth in the second quarter. This result is not unexpected, though, in view of the prolonged eurozone crisis and a potential U.S. fiscal cliff.
The Bank of Korea (BOK) cut its 2012 growth forecast from 3% to 2.4% and expects 2013 growth percentages to be lower than initially projected as well. The BOK also cut its policy rate by a further twenty five basis points earlier this month, after a similar cut taking place in July.
Exports and imports rebounded from the previous quarter. Exports, accounting for roughly half of the GDP, have shown a 2.5% growth from the second quarter, while the import growth rose to a 1.7% expansion. Private consumption is also higher, rising from 0.4% to 0.6% in the past three months.
Facility investment continues its downward trend with a 4.3% on-quarter decline. Kim Young-Bae, director of the BOK’s economic statistic department attributes these disappointing results to external uncertainties, particularly the above mentioned European fiscal crisis. He believes that “fiscal expenditure by the government contributed significantly to block the sharp economic slump” in South Korea.
South Korea’s economy “…appears to have bottomed during the third quarter”, said Daewoo and Hyundai Securities. It is expected that the economy will rebound in this last quarter, though, aided by continued government stimulus. China, South Korea’s main export destination, is also starting to show signs of economic stabilization, which should lead to an increasing GDP in both countries.