'Textbook return to growth': Korea's Q1 GDP surges beyond expectations

Skyscrapers observed from Mount Namsan in central Seoul on Feb. 22, 2023. [YONHAP]

Korea’s two-year-high, stronger-than-expected growth in the first quarter is a “textbook return to the growth path” for the country’s economy, said the Ministry of Economy and Finance on Thursday.

The country's growth may outpace the government's initial forecast for the beginning of the year, with any adjustments to its annual growth forecast of 2.2 percent likely to occur in the latter half of the year.

Korea’s real GDP increased by 1.3 percent on quarter in the January-March period, according to preliminary data from the Bank of Korea (BOK), exceeding the market estimate of between 0.5 percent and 0.6 percent growth.

It is the fastest pace in more than two years as private spending and construction investment recovered on improved exports.

The latest data is “a clear green light” for the Korean economy, said the Economy Ministry, noting that the private sector drove the rebound. The private sector’s contribution to economic growth stood at 1.3 percentage points in the first quarter, while the government's contribution was estimated to be neutral at 0 percentage points, according to the ministry.

The Economy Ministry said that the government's contribution to growth typically appears negative in the first quarter due to preparations necessary for budget execution. It also cited the base effect of the latter half of last year where the government’s contribution stood at 0.4 percent in the third quarter, and 0.4 percent in the fourth.

The ministry expects this positive trend to continue, with fluctuations from quarter to quarter, driven by export growth and gradual expansion of domestic demand.

"To continue with the growth trend, the ministry will bolster our policy effort to further spread the recovery through the economy while stabilizing the livelihood for households regarding commodity prices and more," the ministry said.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]