Investments, exports help Q1 GDP to grow 2.8%

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Investments, exports help Q1 GDP to grow 2.8%

The Korean economy rebounded in the first quarter as a combination of high investment, government spending and exports fueled growth. Still, stubbornly low domestic consumption and record-high unemployment clouds prospects for achieving the central bank’s growth forecast of growth for the year, which is 3 percent.

The Bank of Korea said on Thursday that the county’s gross domestic product (GDP) increased 1.1 percent between January and March compared to the previous quarter. On a yearly basis, the economy grew 2.8 percent.

Along with improved facilities and construction investment and robust exports, abnormally low growth in the fourth quarter of 2017 was a factor pushing up the latest result.

“Facilities and construction investments and exports showed a steady pace of expansion,” said Chung Kyu-il, director general of the central bank’s economic statistics department.

“The base effect also played into the figure,” Chung said.

Construction investment rose 2.5 percent during the first three months over a quarter earlier while investment in equipment jumped 5.2 percent due mainly to demand for semiconductor and in the logistics segment.

Exports expanded 4.4 percent, driven by machinery and petrochemicals. Domestic consumption edged up 0.6 percent on quarter.

By industry, manufacturing and construction reversed negative growth in the previous quarter. Manufacturing saw production gain 1.9 percent on a quarterly basis while builders recorded an increase of 1.3 percent.

To achieve the 3 percent growth predicted by the BOK, Chung said that the remaining three quarters must register GDP growth between 0.77 percent and 0.82 percent.

He declined to predict whether the economy would achieve those numbers.

Some analysts, however, took cautious approaches with many warning that the Korean economy will face some headwinds entering the second half of this year.

“We lower this year’s growth forecast from 3 percent to 2.8 percent,” said Lim Hye-youn, an economist at Daishin Securities, “The government’s efforts to stimulate the economy and the upbeat trend in the IT industry would spare the country from a drastic economic downturn. “Still, the downside risks facing Korea will intensify through the second quarter.”

Others painted a more optimistic picture.

The head of a local financial think tank, the Korea Institute of Finance, hinted that his institution may revise upward its 2-18 forecast from the current 2.8 percent.

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