Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

S.Korea's Q3 GDP miss forecasts, supply disruptions add pressure

Published 10/25/2021, 07:11 PM
Updated 10/25/2021, 10:45 PM
© Reuters. FILE PHOTO: A truck drives between shipping containers at a container terminal at Incheon port in Incheon, South Korea, May 26, 2016.REUTERS/Kim Hong-Ji

© Reuters. FILE PHOTO: A truck drives between shipping containers at a container terminal at Incheon port in Incheon, South Korea, May 26, 2016.REUTERS/Kim Hong-Ji

(Corrects typographical error in lede.)

By Joori Roh

SEOUL (Reuters) - South Korea's economy grew at a slower-than-expected pace in the third quarter, as subdued private consumption and weak construction and facility investment offset robust exports.

Gross domestic product (GDP) grew a seasonally adjusted 0.3% in the third quarter, the Bank of Korea (BOK) data showed on Tuesday, the slowest in five quarters and following a 0.8% rise in the preceding three months. It also fell short of the 0.6% growth tipped in a Reuters survey.

Private consumption, which generates nearly half of South Korean GDP, contracted 0.3% in the September quarter after a 3.6% rise in the second quarter, while construction and facility investments also swung to declines of 3.0% and 2.3%, respectively.

Exports grew 1.5%, recovering from the June quarter's 2.0% contraction, on strong sales of semiconductors and petroleum products.

"The toughened social distancing measures and impacts from the heat wave and rising raw material prices that continued over the third quarter seem to have limited the recovery in domestic demand ... but exports were seen propping up the economy," Finance Minister Hong Nam-ki said.

From a year earlier, the economy expanded 4.0%, in part because of the low base last year, while both exports and imports picked up further on global economic recovery.

That was, however, a significant slowdown from the second quarter's 6.0% growth, and missed market forecast growth of 4.2%.

"The data does not diverge much from the August projection. Annual growth of 4% will be possible should the economy expand 1.04% on a sequential basis during the fourth quarter," a senior BOK official Hwang Sang-pil told reporters.

The BOK currently sees the economy growing 4% for the whole of 2021 after shrinking 0.9% last year.

Economists, however, are concerned global supply chain disruptions and inflation pressures may pose risks to the fourth-quarter outlook.

"The near-term outlook for exports and manufacturing sector is likely to be clouded by sustained concerns about the global supply bottleneck," Societe Generale (OTC:SCGLY)'s economist Oh Suk-tae said.

But the economy could regain steam as the government aims to scrap the COVID-19 curbs by early 2022, which could add a further boost to consumption. The three-phase scheme begins on Nov. 1.

© Reuters. FILE PHOTO: A truck drives between shipping containers at a container terminal at Incheon port in Incheon, South Korea, May 26, 2016.REUTERS/Kim Hong-Ji

"With the transition to a new COVID-19 scheme in November, the expansion in private consumption will contribute to the economic recovery, while the oil tax cut announced earlier today will also help boost consumption," Hwang said.

The finance ministry said it will temporarily cut down domestic tax on key oil products by a record 20% to reduce pressures from surging oil prices.

Latest comments

No worries. US stock markets will march on, heading for the cliffs, dragging everything and everyone with them
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.