Q3 Economic Growth Rate 0.3%... Consumption and Facility Investment Outperform Market Expectations

Bank of Korea Announces Preliminary Q3 Real GDP Growth Rate
Grows 0.3% Quarter-on-Quarter, Marking 9 Consecutive Quarters of Growth
Private Consumption, Government Spending, and Exports All Increase

Finished vehicles are waiting in the storage yard next to the export shipment dock at Hyundai Motor Company's Ulsan plant. [Image source=Yonhap News]

South Korea's economy grew by 0.3% quarter-on-quarter in the third quarter, driven mainly by private consumption and facility investment.

On the 27th, the Bank of Korea announced that the real gross domestic product (GDP) growth rate for the third quarter of this year (preliminary figure, quarter-on-quarter) was 0.3%.

The quarterly growth rates showed negative figures in the first quarter (-1.3%) and second quarter (-3.0%) of 2020 when COVID-19 spread, followed by growth of 2.3% in the third quarter, 1.2% in the fourth quarter, 1.7% in the first quarter of 2021, 0.8% in the second quarter, 0.2% in the third quarter, 1.3% in the fourth quarter, 0.6% in the first quarter of this year, 0.7% in the second quarter, maintaining a growth streak for nine consecutive quarters including this one.

Looking at the third quarter growth rate by sector, exports, private consumption, and government consumption all increased.

Private consumption rose 1.9% quarter-on-quarter due to increased durable goods such as passenger cars and services like food and accommodation. Government consumption increased by 0.2%, mainly due to spending on goods, and construction investment grew by 0.4% as non-residential building construction increased.

Facility investment increased by 5.0% quarter-on-quarter as both machinery and transportation equipment rose.

Exports shrank by 3.1% in the second quarter but grew by 1.0% in the third quarter. Although exports of semiconductors and others declined, exports of transportation equipment and services were favorable. Imports increased by 5.8%, mainly in crude oil, machinery, and equipment.

However, since imports increased more than exports, net exports pulled down the growth rate by 1.8 percentage points. The accumulated trade deficit is interpreted as having some negative impact on economic growth.

By industry, manufacturing decreased as in the previous quarter, while the service sector showed growth.

Manufacturing declined by 1.0% due to decreases in computers, electronics and optical equipment, and chemical products, while agriculture, forestry, and fisheries increased by 5.5%, centered on livestock farming.

Additionally, electricity, gas, and water supply businesses grew by 0.3%, construction grew by 1.8%, and the service sector also increased by 0.7%, driven by wholesale and retail trade, accommodation and food services, finance and insurance, culture, and other services.

However, real gross domestic income (GDI) decreased by 1.3% quarter-on-quarter despite the GDP increase, due to worsening terms of trade.

Although there were concerns about possible negative growth in the third quarter due to the prolonged Ukraine crisis and global economic slowdown caused by interest rate hikes in major countries, growth continued supported by private consumption and exports.

The Bank of Korea forecasts South Korea's GDP growth rate for this year at 2.6%. This is achievable if the economy grows by 0.1 to 0.2% quarter-on-quarter in both the third and fourth quarters.

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