Wednesday, October 5, 2022

S Korea first quarter GDP growth to bounce sharply from fourth quarter on exports, capex

S Korea first quarter GDP growth to bounce sharply from fourth quarter on exports, capex

SEOUL - South Korea's economic growth likely accelerated at a sharper pace in the first three months of the year than the previous quarter as exports and capital investment tracked a recovery in the global economy.

The local economy is expected to have expanded by a median 0.7 percent over January-March in seasonally adjusted terms from the previous quarter, according to a Reuters poll. On a yearly basis, respondents predicted a median 2.6 percent rise.

While North Korean provocations, a diplomatic spat with China and ongoing corporate restructuring present downside risks to the economy, a new president, to be elected May 9, is likely to boost government spending, which should be supportive of growth this year.

Frontrunner democratic candidate Moon Jae-in has already promised an extra budget of over 10 trillion won (£6.91 billion) if he is elected to support jobs and domestic consumption.

In the fourth quarter of last year, the economy grew 0.5 percent in seasonally adjusted terms, while on-year, it grew 2.4 percent.

"Exports and investment likely rose faster than expected, driving growth," said June Park, an economist at Daishin Economic Research Institute.

"Sluggish consumption is a problem for the South Korean economy but after the May 9 election, consumer sentiment is expected to improve on hopes for economic policies by the new president."

The poll's results were largely in line with Finance Minister Yoo Il-ho's comments over the weekend the economy is expected to exceed the ministry's previous growth expectation of 2.6 percent this year. He had also reiterated previous government officials' comments that first-quarter growth will likely be better than expected.

Going forward, second quarter growth may slow a bit, analysts said, due to China curbing South Korean businesses there in retaliation against the deployment of the U.S. Terminal High Altitude Area Defence radar system in South Korea, which Beijing believes can penetrate its territory.

China is strongly against the deployment but has denied its actions are directly linked to the political spat. South Korea and the United States have said THAAD is only aimed at curbing North Korea's missile threats.

The Bank of Korea will release first-quarter growth data on April 27. It currently sees GDP growth this year at 2.6 percent. -Reuters