Korean economy avoids recession in Q1; outlook dims amid weak exports

Containers at Incheon port on March 21 [NEWS1]

Korea's economy narrowly avoided a recession in the first quarter of the year after a contraction the previous quarter, central bank data showed Tuesday.

The economy grew 0.3 percent in the January-March period from the previous quarter, according to the preliminary data compiled by the Bank of Korea. The first-quarter expansion follows a 0.4 percent on-quarter contraction the previous quarter.

Technically, two consecutive quarters of economic contraction are judged to be a recession.

On a yearly basis, Asia's fourth-largest economy expanded 0.8 percent in the first quarter, compared with the fourth quarter's 1.3 percent on-year gain.

The rebound in growth came as the country's exports fared well relatively compared with the previous quarter and domestic demand gained traction.

But the economic growth for the year is widely expected to slow down.

The country's outbound shipments have logged an on-year fall since October last year amid aggressive monetary tightening by major economies to curb inflation. It is also the first time since 2020 that exports have declined for six months in a row.

The private spending is also likely to be weighed down by higher interest rates.

The pause came after the BOK had delivered seven consecutive hikes in borrowing costs since April last year.

The central bank held its key interest rate steady at 3.5 percent for the second straight time earlier this month as inflation appears to be easing and concerns are rising over an economic slowdown.

Last year, the country's economy grew 2.6 percent, slowing from a 4.1 percent advance the previous year amid aggressive monetary tightening at home and abroad.

The 2022 growth marked the slowest pace since 2020, when the economy contracted 0.7 percent amid the fallout from the coronavirus pandemic.

For the year, the BOK expects a 1.6 percent expansion, and the International Monetary Fund sees a 1.5 percent advance.

The Organization for Economic Cooperation and Development projects South Korea's growth outlook for 2023 to be 1.6 percent.

Yonhap