South Korea’s economy barely grew in the third quarter, inching up 0.1% quarter-on-quarter, according to Bank of Korea (BOK) data released on Oct. 24. The country’s gross domestic product (GDP) growth fell short of BOK and market forecasts, which had predicted growth of 0.3% to 0.5%.
While Asia’s fourth largest economy expanded compared to the previous quarter’s 0.2% contraction, it failed to recover fully as a slowdown in exports limited growth.
The BOK said in an advance estimate that Korea’s GDP expanded 0.1% during the three months from July to September compared to the previous quarter. The country’s GDP grew 1.3% quarter-on-quarter in the first quarter of this year before contracting 0.2% in the second quarter and remained almost flat in the third quarter.
Third-quarter GDP growth missed market expectations. The BOK had previously predicted 0.5% growth for the third quarter, and domestic securities firms had forecasted growth between 0.3% and 0.5%.
The BOK explained that weak exports weighed down growth. Exports dropped by 0.4% in the third quarter, led by declines in key sectors such as automobiles and chemicals. This marked the first export contraction in seven quarters, following a 3.7% decline in the fourth quarter of 2022. Meanwhile, imports rose by 1.5% in the third quarter, following a 1.6% increase in the second quarter.
Domestic demand rebounded from a 0.2% decrease in the second quarter. Private consumption in the third quarter grew by 0.5%, driven by solid spending on goods such as cars and communications devices and services like healthcare and transportation.
Fixed investment grew by 6.9%, helping the economy narrowly avert another contraction, while construction investment fell by 2.8%.
The economy expanded 1.5% year-on-year, also missing market forecasts of 2.0%. The lower-than-expected year-on-year growth has cast doubt on the BOK’s full-year growth forecast of 2.4%.
“South Korea’s third-quarter GDP was a disappointment, expanding only slightly,” said Dave Chia, Associate Economist at Moody’s Analytics. “For the first time since the first quarter of 2023, the country’s key growth driver, real exports, declined, driven by a drop in good exports.”
