GDP grew 3.2% in Q2 thanks to brisk spending
The country’s real gross domestic product (GDP) expanded 0.7 percent between April and June compared to the first quarter, according to preliminary data released by the Bank of Korea (BOK) on Tuesday. That follows 0.5 percent growth in the previous quarter.
From a year earlier, the real GDP increased 3.2 percent during the April-June period.
Some analysts warned of Korea entering a low growth era as GDP growth stayed below 1 percent for three consecutive quarters since the fourth quarter of last year.
“The second quarter managed to head off a further decline, but a slight improvement in some sectors cannot be seen as a full sign of recovery,” said Sung Tae-yoon, an economics professor at Yonsei University.
To spur domestic growth, the government enacted a series of measures including a consumer tax cut on cars and the designation of a special holiday.
The central bank slashed its benchmark interest rate to a record low of 1.25 percent in June.
Skeptics maintain that the 0.7 percent growth is lower than expected when taking into account various government stimulation measures.
Still, a glimmer of growth appeared in some sectors.
The greatest improvement came in consumer spending, which rebounded to 0.9 percent from a negative 0.2 percent in the first quarter.
The BOK noted that the expansion in spending is primarily attributed to the government’s measures aimed at stimulating spending.
“Consumption in general recovered, boosted by increased car sales, which were attributed to the tax cut,” said Kim Young-tae, division head at the BOK.
“Spending in the services sector also increased thanks to the government’s decision to designate an additional holiday,” Kim said.
Business investment in equipment also perked up, from shrinking 7.4 percent in the first quarter to growing 2.9 percent in the second.
Exports, Korea’s economic backbone, grew 0.9 percent from the previous quarter.
Gross domestic income, however, dropped 0.4 percent from the previous quarter, the first decline in five years.
The second quarter GDI worsened from a 3.0 percent rise three months earlier, according to the BOK.
BOK’s Kim said that the country’s GDP growth rate will be in line with the central bank’s annual GDP forecast of 2.7 percent.
BY PARK EUN-JEE, PARK JIN-SEOK [firstname.lastname@example.org]