South Korea’s Q4 growth momentum falters

SEOUL – South Korea’s Q4 GDP grew by 0.6% q/q sa, compared with 1.3% in Q3, in line with market expectations. On a yearly basis, GDP increased by 3.0%. For the full year of 2015, the economy expanded by 2.6%, from 3.3% the previous year, in line with the Bank of Korea’s latest forecasts.

ANZ Bank says Q4 growth was led by private consumption, which picked up to 1.5% q/q from 1.2% in Q3 and a 0.2% drop in Q2, which was severely impacted by the MERS outbreak. Investment fell 0.4% y/y, largely dragged by a 6.1% decline in constructions.
Facilities investment grew by 0.9% in Q4, below 1.8% in Q3. Notably, the growth of exports of goods and services increased to 2.1%, from a 0.6% drop in Q3, offset by imports growth which accelerated to 2.8% in Q4, from 1.1% in Q3.
ANZ says the slowdown of major economies will continue to weigh on Korea’s economy in 2016. China is forecast to grow by 6.4% and the US economy to expand by a little over 2.0% this year. Low oil prices will continue to drag Korea’s trade. “In 2015, petrochemical and petroleum product exports totalled US$36.5bn and US$31.1bn respectively, down 22.1% y/y and 37.3% y/y. These two product groups accounted for 6.9% and 5.9% of total exports in 2015.”
ANZ is forecasting that Korea’s GDP will grow by 2.9% in 2016. It says the new Finance Minister, Yoo Il-ho, regards today’s GDP figure disappointing.
“He reiterates that the Government will aim to achieve 3.0% growth in 2016. Against this backdrop, the BOK will likely maintain an accommodative monetary stance in 2016 and is forecast to cut the policy rate by 25bps in Q1 and another 25bps in Q2.” www.live.anz.com (ATI).