Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

South Korea second-quarter GDP bounces as public spending offsets private sector drag

Economic IndicatorsJul 24, 2019 08:19PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

By Choonsik Yoo and Joori Roh

SEOUL (Reuters) - South Korea's economy swung back to growth in the second quarter, dodging a technical recession, although the expansion was mostly driven by government spending, suggesting the central bank may need to cut rates again to stoke demand.

Gross domestic product grew by a seasonally adjusted 1.1% in the April-June period from the first quarter, central bank estimates showed, just beating the median forecast of 1.0% growth tipped in a Reuters survey of 12 economists.

However, the Bank of Korea estimates showed the economy would have contracted without increased government spending, following previous quarter's surprise contraction.

"Details of the GDP data confirmed the economy has been dependant on government spending and support my expectation of another interest rate cut in the fourth quarter," said Park Sang-hyun, economist at HI Investment & Securities.

Heavily reliant on exports of chips, smartphones, autos and ships, South Korea's economy has been hit especially hard by the year-long China-U.S. trade dispute, which has hurt supply chains and global growth.

BOK estimates showed government spending contributed 1.3 percentage points to second-quarter GDP while private-sector activity presented a 0.2 percentage point drag as companies slashed investment due to the uncertain outlook.

Last week, the BOK cut interest rates for the first time in three years, earlier than market expectations for a cut in August, and trimmed its 2019 economic growth forecast to a decade low of 2.2% from the previous 2.5%.

South Korea's economy shrank 0.4% in the first quarter due to delays in government spending as private investment also slowed.

On a year-on-year basis, Asia's fourth-largest economy expanded 2.1% in the second quarter, compared with 2.0% growth forecast in the poll and 1.7% growth in the first quarter, the central bank estimated.

Merchandise exports returned to growth of 2.3% in the April-June period after a 3.2% contraction in the first, which was the worst reading since the final quarter of 2017.

But export prospects remain uncertain as Japan has curbed chip and display production materials shipments to South Korea, which Seoul says is related to a diplomatic row over compensation of forced labor during World War Two.

The BOK said in a report to parliament on Tuesday that Japan's export curbs were one of the top three risks to the domestic economy. Governor Lee Ju-yeol added that this year's growth could dip further due to the curbs.

Analysts have downgraded their forecasts for 2019 growth, with some seeing growth falling short of 2%.

(This story corrects first bullet of Q2 GDP quarterly figure)

South Korea second-quarter GDP bounces as public spending offsets private sector drag
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email