Korea's private spending growth in Q3 lags behind G7 average

Finance

Published: 01 Jan. 2024, 17:50

Korea's private spending growth in Q3 lags behind G7 average

Korea's private spending in the third quarter grew at a far slower pace than that of Group of Seven countries due to high interest rates and inflation, according to the Organisation for Economic Cooperation and Development on Monday. [YONHAP]

Korea's private spending in the third quarter grew at a far slower pace than that of Group of Seven (G7) countries due to high interest rates and inflation, data showed Monday.

According to the data compiled by the Organisation for Economic Cooperation and Development (OECD), Korea's private consumption rose 0.2 percent in the three-month period through September from a year ago.

It is the lowest quarterly growth since the fourth quarter of 2020 when the corresponding figure slumped 6.4 percent amid the Covid-19 pandemic.

The easing of Covid-19 restrictions pushed up Korea's consumption growth to 4.6 percent in the first quarter of 2023, but the figure has been on the decline due to monetary tightening and high consumer prices, dropping to 1.5 percent in the second quarter.

While the slowdown in consumption is common across the globe, Korea's downside pace is faster than that of major developed countries.

G7 countries — the United States, Britain, Germany, France, Japan, Italy and Canada — saw their average private spending increase 1.2 percent on-year from July to September, while the average figure for the 38 OECD member nations posted 1.5 percent in the same period.

Experts noted that Korea's inflation rate, which has been slowing recently but at a very slow pace, still remains a constraint on consumption.

Korean economy recorded a 3.6 percent growth in consumer prices for 2023, slower than 5.1 percent a year before, continuing to experience high inflationary pressure.

The Bank of Korea (BOK) said in November that it will maintain its tightening policy until inflation approaches its target level of 2 percent.

The central bank kept its key interest rate unchanged at 3.5 percent for the seventh straight time. The BOK delivered seven consecutive rate hikes from April 2022 to January 2023.

BY KIM JU-YEON, YONHAP [kim.juyeon2@joongang.co.kr]