Economy’s growth hits 10-year low at 1.8 percent

In the first quarter, Korea’s economy grew at the slowest pace in more than a decade.

According to the Bank of Korea (BOK) on Thursday, the Korean economy in the first three months of 2019 expanded 1.8 percent, the slowest rate since the third quarter of 2009 - in the depths of the global financial meltdown - when growth was 0.9 percent. On a quarterly basis, GDP growth between January and March declined 0.3 percent. This was the first time since the fourth quarter of 2017 that growth on a quarterly basis was negative.

In the last three months of 2017, the economy declined 0.2 percent on a quarterly basis, the BOK reported.

That was the sharpest decline since the fourth quarter of 2008, when the economy shrank 3.3 percent compared to the previous quarter.

The announcement came after the central bank last week lowered its growth projection for 2019 from 2.6 percent to 2.5 percent, following other institutions that have been cutting their growth forecasts, while the finance minister submitted a 6.7 trillion won ($5.7 billion) stimulus budget to the National Assembly.

Finance Minister Hong Nam-ki held an emergency economic meeting on Thursday after the disappointing growth report was released.

“I called an emergency ministers meeting to evaluate the economic status and possible counter measures as the first quarter GDP results have fallen below our expectation,” Hong said.

He cited three reasons for the decelerating growth: the slowing growth of the global economy, which is affecting Korea’s exports, particularly semiconductors, which account for 21 percent of all Korean exports; growing external uncertainties, including trade conflict between the United States and China as well as Brexit, has shrunk investments in the private sector, resulting in the falling operating rates of factories; and relatively higher quarterly growth in the fourth quarter, the biggest increase since the first quarter of 2009.

The BOK report showed that private sector investment has declined sharply. In the first quarter, facilities investment plummeted 16.1 percent compared to the same period a year earlier. When compared to the previous quarter, investment fell 10.8 percent. Exports only inched up 0.2 percent year on year, while on a quarterly basis they fell 2.6 percent. Imports fell 5.4 percent compared to the previous year and were down 3.3 percent on a quarterly basis. The decline in imports was directly related to corporate facilities investments, which involved lots of imported materials and machinery.

Output from the manufacturing industry went up 1.4 percent year on year, although on a quarterly basis it fell 2.4 percent.

Government spending was up 5.2 percent year on year while private consumption grew 1.9 percent.

Finance Minister Hong once again stressed the importance of speed in executing the supplementary budget, directing his remarks to the National Assembly.

The government drew up a 6.7 trillion won supplementary budget on Wednesday, which is designed to target major issues - the weak economy, reinforcement of public safety, which includes fine dust pollution and disaster relief.

“Through the supplementary budget, we will be able to back up economic policies including revitalizing investment and exports,” Hong said.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]