Economy tipped to post negative growth in Q3

Those hoping for an upswing in Q3 may be destined to dally with disappointment as analysts at home and abroad project the domestic economy will either see no change or post negative growth after a sluggish Q2.

The economy barely inched up 0.4 percent on-quarter in the April-May period, but even this meager growth looks appealing now as the impact of the decelerating global economy weighs on emerging markets like China and the euro zone fiscal crisis remains unresolved.

The anticipated slowdown would continue a yearlong trend as quarterly growth stood at 0.9 percent from the end of 2011 to Q1 this year.

Sluggish domestic market and dwindling outbound shipments contributed to the disappointing results. Exports in July plunged 8.8 percent on-year to $44.6 billion, the sharpest drop since October 2009.

Indications that the global economy is still on a downward slope are too prominent to ignore. Japan announced yesterday that it grew 1.4 percent on-year in the second quarter, falling short of its anticipated growth of 2 percent. This fueled belief that Japan’s economy will slump further in Q3.

Moreover, Bank of America Merrill Lynch has lowered its outlook for China’s economic growth this year from 8 percent to 7.7 percent. It also downwardly revised its expectation of China’s Q3 growth from 8 percent to 7.4 percent, citing waning exports.

The U.S. investment bank recently projected that Korea’s annual economic growth could retreat to 1.8 percent, almost half of the government’s target of 3 percent.

Analysts at the economic research institutes of Samsung and LG both see the economy keeping pace with the first half throughout 2012, but not raising any higher.

“It will likely grow between 0.1 and 0.2 percent in the third quarter,” said a Samsung Economic Research Institute analyst.

By Lee Ho-jeong [ojlee82@joongang.co.kr]