South Korea’s GDP growth lifts, steady growth outlook

SEOUL – South Korea’s GDP growth picked up to 0.9% q/q in Q3, from 0.5% in Q2, in line with market expectations. Private consumption increased 1.1% q/q, from a 0.3% contraction in the previous quarter. Government consumption growth accelerated to 2.2% in Q3, up from 0.3% in Q2. Gross fixed capital formation rebounded to 1.4%, following a 0.2% contraction, led by construction which grew 2.9%.

However, facilities investment fell 0.8%, reflecting the soft business sentiment. Exports contracted 2.6%, while imports declined 0.7%. On a y/y basis, the economy grew 3.2% in Q3, down from 3.5% previously.
In a research note, ANZ Bank says Korea will see steady growth over the next few quarters. “While data shows that domestic demand has been sluggish, we believe that the Bank of Korea (BOK)’s recent monetary policy easing should be able to lift business sentiment in the coming quarters.
“The central bank has done its part and now it’s the Ministry’s turn to boost growth. We estimate that the Government’s expansionary budget in 2015 will lift GDP by 0.2ppt over 2015.
“Trade statistics also show that external demand has improved on the back of a pickup in the tech supply chain. We believe that Korea’s GDP will grow 3.6% y/y in 2014, and 3.9% in 2015. However, downside risks remain if the tech sector is unable to sustain its strong performance this year into 2015.” www.live.anz.com (ATI).