S. Korea Q2 GDP rebounds on government spending after Q1 contraction

26, Jul. 2019

SEOUL, NNA - South Korea’s export-reliant economy rebounded in the April-June quarter, after contracting in the previous three months, helped by higher government spending

The Bank of Korea released the latest gross domestic product data on Thursday.

Key points:

―― GDP increased a seasonally adjusted 1.1 percent in April-June from the previous quarter, when it shrank 0.4 percent. Growth in Q1 was the strongest since 1.5 percent in Q3 of 2017.

―― Private consumption, which accounts for nearly half of total domestic output, climbed 0.7 percent after a 0.1 percent rise in January-March. Government consumption rose by 2.5 percent, mainly due to increased health-care benefits, following 0.4 percent growth in Q1.

―― Construction spending grew 1.4 percent, reversing an 0.8 percent drop in the previous quarter, while business investment in equipment gained 2.4 percent, rebounding from a 9.1 percent slump in Q1.

―― Exports rose 2.3 percent, led by motor vehicles and semiconductors. It was the first increase in three quarters.

―― Asia’s fourth-largest economy expanded 2.1 percent compared to a year earlier, accelerating from 1.7 percent y/y growth in the first quarter.

Takeaway:

―― The South Korean economy may need further support from monetary policy. Bank of Korea Governor Lee Ju-yeol told reporters last week that the central bank still has room to ease further after it cut its policy rate and slashed its economic growth and inflation forecasts. It joined emerging market central banks in easing in the face of growing downside risks amid the U.S.-China trade row and sluggish global demand for semiconductors.