Korean economy grew 0.9% in first quarter
The Bank of Korea on Thursday revealed the economy expanded 0.9 percent during the first three months of this year compared to the previous quarter. It was the strongest growth that Asia’s fourth-largest economy has experienced in nine months.
Coupled with strong export numbers, several think tanks have been busily revising their outlook for the year. The latest was LG Economic Research Institute. On Thursday, the think tank significantly raised its projection for GDP growth this year from 2.2 percent to 2.6 percent. Last month, the Bank of Korea had already raised its outlook for the year from 2.5 percent to 2.6 percent.
LG Economic Research Institute said one of the biggest factors in its revision was the recovery of exports. Outbound shipments from January to March saw double-digit growth, largely driven by semiconductors. Global demand has been increasing sharply with the growing appetite for faster and denser computer chips that can process more information.
As a result, Samsung Electronics, the world’s largest manufacturer of semiconductors, enjoyed its second-highest operating profit last quarter, and No. 2 SK Hynix enjoyed record-high quarterly profit. In March alone, Korean exports of computer chips rose 44.3 percent from last year.
LG Economic Research Institute noted in its report that while last year’s growth was led by the domestic economy, largely due to government policies that focused on consumer spending and a booming real estate market, this year’s recovery appears to be export-driven.
Consumer spending may add to the growth. Koreans spent less late last year as the country was swept in a political scandal surrounding now-ousted President Park Geun-hye and accusations of bribery with conglomerates like Samsung and Lotte.
However, Lee Ju-yeol, governor of the Bank of Korea, said earlier this month that consumer sentiment has already seen improvements since Korea’s Constitutional Court ruled to remove Park from office. Earlier this week, a central bank report showed consumer sentiment was positive for the first time in six months.
Consumer sentiment is expected to improve after the presidential election in early May.
Still, some market observers warn of risk stemming from geopolitical tension, especially with North Korea and China. The recovery comes at a time when Pyongyang is ratcheting up its threats against the United States and Beijing is protesting America’s expanding military presence in the Northeast Asian region.
“Despite the upturn in Q1 2017 GDP growth, the South Korean economy still faces significant headwinds during 2017,” said Rajiv Biswas, chief economist on the Asia-Pacific market at IHS. “Economic measures taken by China in response to South Korea’s decision to install the U.S. Thaad missile defense system only began to take effect in March, and therefore will have a more significant impact in the April-June GDP data.”
BY LEE HO-JEONG [firstname.lastname@example.org]