Government Confident in 3Q Plus Growth... Forecasts Mid-to-High 1% Range

Possibility of Recovering About Half of Q2 Decline
Defending Growth Rate by Fully Focusing on Private Consumption Recovery

[Asia Economy Reporter Kim Eun-byeol] As the government confidently anticipates a 'positive turnaround' in the South Korean economy in the third quarter, the economic growth rate for Q3 is expected to have recorded a mid-to-high 1% range (quarter-on-quarter). South Korea's quarterly economic growth rate is announced as the GDP growth rate compared to the previous quarter. Since the growth rate plummeted to -3.2% in Q2 due to the peak impact of the COVID-19 pandemic, a positive turnaround in Q3 growth rate as the spread subsided was already expected. However, due to the resurgence of COVID-19 and sluggish consumer recovery, the growth rate is expected to recover only about half of the decline seen in Q2.

According to a survey conducted by Bloomberg on the 21st targeting 36 economic experts, the Bank of Korea's Q3 economic growth rate, to be announced on the 27th, is estimated to have risen by 1.8% quarter-on-quarter. This figure, compiled between the 9th and 14th of this month, reflects the impact of the COVID-19 resurgence. However, considering that their forecast for South Korea's annual growth rate is -1.1%, which is 0.2 percentage points higher than the Bank of Korea's late August forecast (-1.3%), the actual Q3 growth rate is likely to be in the mid-1% range.

Bank of Korea Governor Lee Ju-yeol stated on the 14th, "We judge that the future growth trajectory generally aligns with the August forecast path." To achieve this year's annual growth forecast (-1.3%), growth rates of about 1.3% each in Q3 and Q4 are required. However, this is a simple calculation, and considering that the growth rate compared to the previous quarter is expected to be higher in Q3, the forecasted growth rate for Q3 is mid-to-high 1%, and for Q4, around low 1%.

Ultimately, the resurgence of COVID-19, which is causing consumer contraction, is expected to act as a variable. According to the Bloomberg survey, private consumption in Q3 is expected to have decreased by 3.7% quarter-on-quarter. Although the contraction in consumption was less severe than in Q1 (-6.5%), when the COVID-19 resurgence was in its early stages, it has turned negative again.

This is also why the government persistently introduces new consumption measures whenever the COVID-19 spread calms down. Since exports move according to external trade conditions and are difficult to influence, the government aims to defend the growth rate through consumption stimulation policies. After receiving a report on economic issues from Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki the day before, President Moon Jae-in said, "Please create a successful model in the economy as well as in COVID-19 prevention by focusing all efforts not only on exports, which are showing recent improvement trends, but also on domestic demand recovery."

Exports in Q3 are expected to have decreased by 9.7%, significantly less than the 16.1% decline in Q2, but the decrease is still close to 10%. According to the Korea Customs Service on the same day, export value from October 1 to 20 recorded $25.2 billion, down 5.8% compared to the same period last year. During this period, the number of working days was 12, 1.5 days fewer than last year, and considering this, the average daily export value increased by 5.9% ($120 million) to $2.1 billion.

This content was produced with the assistance of AI translation services.