Korean economy expands 0.6 percent in Q3 as consumer spending recovers

Containers are stacked up at a pier in Busan on Oct. 11 [YONHAP]

Korea’s economy expanded 0.6 percent in the July-September period on quarter due to a recovery in consumer spending, according to the advance estimate released by the Bank of Korea (BOK) on Thursday.

It was the third consecutive quarter of growth after the country’s GDP gained 0.6 percent in the second quarter and 0.3 percent in the first quarter.

But the third quarter growth falls short of at least the 0.7 percent GDP expansion the central bank had projected needs to be raised to meet its annual goal of 1.4 percent growth.

Key agendas that will determine the 1.4 percent annual growth are the recovery of the IT industry and exports to China, said Shin Seung-chul, director general of the Bank of Korea’s economic statistics division, during a press conference held at the bank’s headquarters in central Seoul.

“Economy for the IT industry, like chips, is projected to gradually recover to ease the weak export and contribute to growth, but uncertainties have grown as the impacts of the recent Israel-Hamas geopolitical risks and high U.S. interest rate are uncertain,” Shin said.

He added that 0.7 percent on-quarter GDP growth in the fourth quarter will enable the country’s economy to expand 1.4 percent this year.

In the third quarter, private spending rose 0.3 percent from three months earlier as expenditures on services, including restaurants, accommodations and recreation increased. Government spending inched up 0.1 percent due to a rise in social security benefits.

Construction investment expanded 2.2 percent on a rise in both building construction and civil engineering. But facilities investment fell 2.7 percent driven by a deceleration in machinery.

“The fall in facilities investment was more drastic than expected as the establishment of additional facilities for chips has finished. But facilities investment centered on IT sector, like for chips, is projected to increase next year as the additional establishment of the facilities has been scheduled,” Shin said.

Exports grew 3.5 percent over the same period, swinging into the black from a 0.9 percent fall in the second quarter. Imports rose 2.6 percent compared to negative 3.7 percent over the same period.

Gross domestic income (GDI), a measure of economic activity based on incomes, rose by 2.5 percent in the third quarter from three months earlier. The figure was up from 0.3 percent of growth in the previous quarter.

Korea’s economy has been facing growing uncertainty amid concerns about restrictive monetary policy in major economies and escalating household debt, geopolitical tensions in the Middle East and the U.S.-China trade war.

Earlier this month, China announced that it will tighten export control on graphite from Dec. 1, a key raw material used to make anode materials for EV batteries. EVs are one of the key growth factors in Korea, along with the semiconductor industry.

However, Korea’s dependence on exports to China for graphite for natural graphite is 97.7 percent, and 94.3 percent dependent on synthetic graphite, according to the Korea International Trade Association (KITA) report from this year’s January-September period.

Meanwhile, the BOK held its key policy rate steady at 3.50 percent for the sixth straight time last week amid moderating inflation.

BY JIN MIN-JI, LEE JAE-LIM [jin.minji@joongang.co.kr]