In Q2, Korea’s GDP up 0.6%

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In Q2, Korea’s GDP up 0.6%

Korea’s economy marginally grew in the second quarter as improved consumer spending offset the impact of lower exports.

The country’s gross domestic product (GDP) gained 0.6 percent between April and June compared to the first quarter, according to preliminary data released by the Bank of Korea on Thursday.

Real GDP increased 2.8 percent during the second quarter from a year earlier. The latest quarterly growth falls short of the first quarter’s record 1.1 percent since net exports, a key driver of economic expansion, slowed.

Exports declined 3 percent compared with three months earlier and dropped 0.1 percent from a year ago.

“The reduced shipments of transportation equipment, petrochemicals and chemical products brought down overall exports. Still, the global demand for semiconductors remained strong in the second quarter,” the central bank said in a statement.

Exports acted as the main booster in the first three months, growing 2.1 percent quarter on quarter. But consumer expenditure, which had recently lagged, started picking up in the second quarter as expected in restored consumer sentiment.

Consumer spending rose 0.9 percent compared to the previous quarter, marking the biggest increase since the fourth quarter in 2015.

The demand for durable goods, such as home appliances and handsets, dropped slightly while clothes and shoes enjoyed growing demand.

The country’s overall consumer sentiment hit a more than six year high in June, according to the Bank of Korea. As for investment, the construction sector showed a 1 percent increase from three months earlier, while facilities investment advanced 5.1 percent.

Facilities investment was helped by growing investment in machinery, including semiconductor manufacturing equipment, as the industry has shown healthy performance thanks to robust worldwide demand for computer chips. Morgan Stanley projected that the global recovery in trade will spill over to the private sector, boosting domestic demand.

“Global synchronous recovery to provide a fillip to Korea’s export machine; export recovery to gradually repair private-sector balance sheet and to spill over to domestic demand,” a report released by Morgan Stanley said on Thursday.

The report also expected that exports will remain sound through 2017 and 2018.

“The recent global trade recovery has led Korea’s export volume and export value to recover since Jan. 2016. Looking ahead we expect Korea’s year on year export value to show some volatility,” it said.

The positive outlook is in line with the research institute and the government’s move to revise up 2017’s economic growth. The Ministry of Strategy and Finance estimated growth at 3 percent when the supplementary budget comes into effect. The Korean central bank revised up this year’s growth forecast to 2.8 percent from the previous prediction of 2.6 percent.


BY PARK EUN-JEE [park.eunjee@joongang.co.kr]

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