South Korea extended its run of positive growth in the third quarter but that growth was slower than expected, jeopardizing the country’s annual growth target, central bank data showed Thursday.
The country’s quarterly real gross domestic product for the July-September period climbed 2 percent from a year earlier and 0.4 percent from a quarter earlier, according to preliminary data from the Bank of Korea.
This latest figure was largely seen as disappointing, especially considering the government’s financial commitment to shoring up the domestic economy no matter what.
Earlier this year, the government added 5.8 trillion won ($4.9 billion) to its initial 469.6 trillion won budget, seeking to revitalize the sluggish domestic economy. Of the supplementary amount, 79.5 percent had been executed by end-September.
Park Yang-su, chief of the BOK’s economic statistics department, speaks in a press briefing. (Yonhap)
“An annual growth of more than 2 percent will be possible only if the economy sees a 1 percent (on-quarter) growth in the fourth quarter, or 0.97 percent to be precise,” said Park Yang-su, chief of the BOK’s economic statistics department.
Citing persisting uncertainties such as the US-China trade dispute and geopolitical risks such as the Korea-Japan trade dispute, Park claimed that the growth pace for the rest of the year will more or less depend on additional government spending.
In July this year, the BOK revised its outlook for economic growth this year to 2.2 percent, down 0.3 percentage point from an earlier projection.
BOK Gov. Lee Ju-yeol, however, later alluded that even this revised target will not be easy to achieve.
Also, Deputy Prime Minister and Finance Minister Hong Nam-ki recently stated that the country’s growth forecast for this year will be lowered to the 2-2.1 percent range, from the current 2.4-2.5 percent range.
“This year’s economic growth will be about the same level forecast by the International Monetary Fund and the Organization for Economic Cooperation and Development,” Hong said last week in Washington.
The IMF recently revised Korea’s growth pace to 2 percent, down 0.6 percentage point from its earlier estimation. The OECD slashed its growth forecast to 2.1 percent, down 0.3 percentage point.
Even the slight GDP growth in July-September period was attributed to government spending, instead of market revitalization, data showed.
While fiscal spending gained 1.2 percent on-quarter during the period, private consumption inched up 0.1 percent. On an on-year basis, government spending soared 6.8 percent in the third quarter, but private spending gained a mere 1.7 percent.
Exports also contributed to the quarterly gain, expanding 4.1 percent on-quarter and 1.3 percent from a year earlier.
Asia’s fourth-largest economy had seen its export volume drop for 10 consecutive months since December last year.
By Bae Hyun-jung (email@example.com)