S.Korea's GDP growth slows in Q3 on lower fiscal spending

2019-10-24 14:33

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SEOUL, Oct. 24 (Xinhua) -- South Korea's real gross domestic product (GDP) growth slowed down in the third quarter on lower fiscal spending and external uncertainties, central bank data showed Thursday.

The real GDP, adjusted for inflation, grew 0.4 percent in the July-September quarter compared with the prior quarter, according to the Bank of Korea (BOK).

It was a downturn from a 1.0 percent expansion in the second quarter. The real GDP contracted 0.4 percent in the first quarter on a quarterly basis.

The third-quarter GDP growth missed market expectations of 0.5-0.6 percent. It was attributable to the government's lower contribution to economic growth in addition to the lingering external uncertainties.

Fiscal spending raised the GDP expansion by 0.2 percentage points in the third quarter, lower than a 1.2 percentage point contribution in the second quarter.

The private sector's contribution to the GDP rebounded from minus 0.2 percentage points in the second quarter to 0.2 percentage points in the third quarter.

Net export lifted the GDP growth by 1.3 percentage points in the third quarter, marking the first rebound in a year.

BOK Governor Lee Ju-yeol told a parliamentary audit of the government offices that an active contribution of fiscal spending would be significant, vowing to manage the BOK's monetary policy to support an economic recovery.

The BOK slashed its benchmark interest rate last week from 1.50 percent to a record low of 1.25 percent, just three months after the rate cut by 25 basis points in July.

Minister of Economy and Finance Hong Nam-ki, who doubles as deputy prime minister for economic affairs, told the parliamentary audit that if the GDP expands 0.97 percent in the fourth quarter on a quarterly basis, the economy would achieve an economic growth of 2 percent this year.

If this year's GDP growth falls below 2 percent, it would be the lowest since the global financial crisis escalated and the South Korean economy rose 0.8 percent in 2009.

External uncertainties remained over the South Korean economy amid the global trade dispute and the downturn of business cycle in the global semiconductor industry.

Export, which accounts for about half of the export-driven economy, kept falling for 10 straight months to September.

The International Monetary Fund revised down its 2019 growth outlook for the South Korean economy to 2 percent earlier this month from 2.6 percent estimated six months earlier.

The Organization for Economic Cooperation and Development (OECD) downgraded this year's growth outlook for the economy from 2.4 percent to 2.1 percent last month, while the BOK lowered its growth forecast from 2.5 percent to 2.2 percent in July.

The government spending rose 1.2 percent in the third quarter from three months earlier, after jumping 2.2 percent in the second quarter.

Private consumption added 0.1 percent in the quarter, a slowdown from a 0.7 percent expansion in the prior quarter. It was attributed to a falling number of South Korean tourists visiting Japan amid the boycott campaign.

South Korean consumers continued a campaign to boycott Japanese products and tours to Japan following Japan's tighter control in July over its export to South Korean of three materials vital to produce memory chips and display panels, the mainstay of the South Korean export.

In August, Japan dropped South Korea off its whitelist of trusted trading partners that are given preferential export procedure. In response, Seoul removed Tokyo from its whitelist of trusted export partners.

The South Korean export climbed 4.1 percent in the third quarter from three months earlier, after growing 2 percent in the second quarter. Import gained 0.9 percent in the quarter.

Facility investment was up 0.5 percent in the third quarter, after expanding 3.2 percent in the previous quarter, while the investment in the construction sector shrank 5.2 percent in the quarter.
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