Even with China’s reopening, South Korea’s heavily trade-dependent economy narrowly avoided a recession in the first quarter, but the prognosis was still gloomy due to sluggish exports caused by a weakening global economy.
According to official advance estimates released on Tuesday, South Korea‘s gross domestic product (GDP) increased by 0.3% in the first quarter compared to the prior three months, which is lower than the median 0.2% increase predicted in a Reuters survey.
Economic Contraction
However, economists viewed it as little more than a technical recovery following a 0.4% contraction in the fourth quarter of 2022, the first recession in two and a half years. This supported their belief that the central bank’s tightening cycle is over.
Oh Suk-tae, an economist at Societe Generale Securities in Seoul, stated, “I don’t see any sign of strength from the detailed figures about the future path of the economy,” adding that he maintains his projection of 0.8% growth for the entire year.
- South Korea’s GDP increased by 0.3% in the first quarter compared to the prior 3 months
- Imports grew by 3.5%, exports increased by 3.8%.
- This year’s economic growth would be less than its earlier estimate of 1.6%.
Private consumption was the largest contributor to GDP during the first quarter, growing by 0.5%, while capital investment shrank by 4.0%, slowing economic development. While imports grew by 3.5%, exports increased by 3.8%.
High levels of internal and external uncertainties exist, but a central bank official stated at a media conference that a recovery in the IT industry and the Chinese economy is likely to spark a rebound in the second half of the year.
Earlier this month, the Bank of Korea predicted that this year’s economic growth would be less than its earlier estimate of 1.6%, even though the central bank had held interest rates constant for two meetings running.
Since the Bank of Korea has increased interest rates by 300 basis points since late 2021, economists currently anticipate no future increases in rates.
According to projections from the Bank of Korea, the nation’s gross domestic product (GDP) increased by 0.8% between January and March of last year, down from 1.3% in the previous quarter and 0.9% predicted in the poll.
