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Financial News: South Korea 2018 GDP Growth At 6-year Low

South Korea 2018 GDP Growth At 6-year Low

01/22/2019 - 07:56:00 (RTTNews)

(RTTNews) - South Korea's economy expanded at the slowest pace in six years in 2018, as a pick-up in fourth quarter was not enough to offset the impact of weakening exports.

Gross domestic product rose 2.7 percent in 2018, which was slower than the 3.1 percent growth in 2017, data from the Bank of Korea showed on Tuesday.

The pace of growth was the weakest since the 2.3 percent in 2012 and was in line with the central bank's projection.

The economy grew 1 percent quarter-on-quarter in the final three months of 2018, after a 0.6 percent expansion in the previous quarter.

"With both domestic and external headwinds to growth likely to mount this year, we doubt this strength will last," Captial Economics economist Alex Holmes said. The firm forecast 2 percent growth for this year.

In the second quarter, the economy grew 0.6 percent after a 1 percent expansion in the first three months of the year.

On a year-on-year basis, GDP grew 3.1 percent in the fourth quarter, after a 2 percent expansion in the previous three months, and exceeded the 2.7 percent economists had expected. The pace of expansion was 2.8 percent in both the first and second quarters.

Quarterly growth was largely driven by government stimulus that boosted state spending by 3.1 percent. Capital investment rose 3.8 percent and construction rebounded with a 1.2 percent gain.

Services exports climbed 3.9 percent from the previous quarter. However, a 2.9 percent slump in merchandise exports led to a 2.2 percent shrinkage in total exports. Imports grew 0.6 percent.

Private consumption growth doubled to 1 percent from 0.5 percent.

Global trade tensions, especially the Sino-US trade war, and the Chinese economic slowdown is hurting the prospects for the South Korean economy.

On Monday, official data showed that South Korea's exports dropped 14.6 percent year-on-year in the first 20 days of this year.

"Korea is a world-class economy, but with two of the main drivers of private sector growth in the doldrums (global trade and technology), 2019 will be a tough year for Korea even with considerable government support," ING economist Robert Carnell said. ING raised the 2019 Korean growth forecast to 2.2 percent from 1.9 percent.

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