2019 saw 2% growth, says BOK, lowest rate since 2009The Korean economy expanded at the slowest pace in a decade in 2019, largely weighed down by an extended slump in outbound shipments amid a lengthy trade row between the United States and China, the central bank said Wednesday.
Korea’s GDP expanded 2 percent in 2019 from a year earlier, according to advance data from the Bank of Korea (BOK).
The figure marks the slowest on-year growth since 2009, when Asia’s fourth-largest economy expanded 0.7 percent in the aftermath of the financial crisis that jolted the global economy the year before.
The Korean economy is expected to grow 2.3 percent this year.
The BOK partly blamed poor export conditions for the lowest growth in a decade but also what it called a “structural” or fundamental change.
The U.S.-China trade dispute and delayed recovery in the global semiconductor market were cited as major reasons for the low growth rate.
“The country’s economic growth depends heavily on exports, and the global economic growth slowed to the lowest since the  global financial crisis,” Park Yang-su, head of the BOK’s economic statistics department, told a press briefing.
“Also, semiconductors account for a large share of our country’s exports, and the sector continued to face very difficult conditions throughout the year,” Park added.
Korea’s exports plunged 10.3 percent from a year earlier in 2019 amid the prolonged trade dispute between the world’s largest economies that are also the largest importers of Korean products.
Semiconductors account for nearly one-quarter of the country’s overall outbound shipments.
Local analysts expect a gradual recovery in the global chip market this year, citing the better than anticipated earnings by Samsung Electronics, the world’s largest chipmaker, in the fourth quarter of 2019.
Park noted the economy may still face other problems such as the pneumonia-like illness originating from Wuhan, China, that could further limit consumption here.
“Because the Wuhan pneumonia is still at its initial stage, it is difficult to predict how much it will affect our economic growth or how much it will spread,” said Park.
But when the country faced the outbreak of the Middle East Respiratory Syndrome in 2015, its consumption dwindled as people stayed inside out of fear, he added.
The remarks came two days after Seoul reported its first confirmed case of the illness.
The growth estimate still was on par with the 2 percent forecast by the central bank, but the BOK’s growth outlook published in November followed three earlier downward revisions - from 2.7 percent in late 2018 to 2.6 percent in January, 2.5 percent in April and 2.2 percent in July.
The annual growth estimate beat market consensus.
In a recent poll by Yonhap Infomax, the financial news arm of Yonhap News Agency, seven analysts predicted Asia’s fourth-largest economy to have expanded 1.89 percent in 2019.
In the fourth quarter of last year, the economy expanded at a better than expected clip of 1.2 percent from three months earlier, fanning hopes that Asia’s fourth-largest economy may get on a recovery track. The figure marks the fastest quarterly growth rate since the third quarter of 2017.
The estimate-beating performance was underpinned by a surge in state spending and firm domestic demand.
“In the fourth quarter, the contribution rate of government spending to growth expanded to 1 percentage point [from 0.2 percentage points three months earlier] on government efforts to minimize the amount of the leftover budget,” Park said.
In 2019, economic expansion generated by exports gained 1.5 percent from a year earlier, sharply slowing from a 3.5 percent on-year expansion in 2018, with that by imports dipping 0.6 percent in the year, marking a turnaround from a 0.8 percent on-year gain in 2018.
Amid the sluggish trade, the country’s overall production by the manufacturing industry also slowed to a 1.4 percent on-year expansion in 2019 from 3.4 percent the previous year.
The construction industry posted a second consecutive year of decline, with its output dipping 3.2 percent last year following a 4 percent drop in 2018.
Fiscal spending jumped 6.5 percent on year in 2019, up from 5.6 percent the year before, making up shortfalls in other sectors.
Private consumption, on the other hand, slowed to 1.9 percent from 2.8 percent over the cited period.
Meanwhile, the country’s gross national income is estimated to have shrunk 0.4 percent from a year earlier in 2019.
The central bank largely attributed the drop to the country’s export prices falling at a faster rate than those of imports, resulting in a dip in the country’s purchasing power.