Lower Growth Rate
The Bank of Korea announced on April 26 that South Korea recorded a quarter-on-quarter GDP growth of 0.37% in the first quarter of this year, the lowest since 0.31% recorded in the fourth quarter of 2014.
The decline in GDP growth rate was led by sluggish private consumption. It showed a decrease of 0.3% from a quarter ago to hit a 21-month low.
“The decline in the first quarter of this year has to do with the advanced consumption in the fourth quarter of last year based on the black Friday event, individual consumption tax cut with respect to automobiles, etc.,” said Lee Keun-tae, senior researcher at the LG Economic Research Institute. The South Korean government cut the individual consumption tax again in early February in order to boost domestic consumption but the effect fell short of its expectations.
Capital expenditures showed a significant drop as well. Specifically, the expenditures fell by 5.9% to hit a 45-month low. Likewise, the quarterly exports declined by 1.7% to reach the lowest level in 51 months.
“The GDP growth rate fell to a large extent as consumption, investment and export, which are the main pillars of the national economy, moved backwards without exception,” the Hyundai Research Institute explained, continuing, “The GDP growth rate is likely to remain low for a while with restructuring programs in different industries being predicted to result in a larger number of unemployed persons and continue to affect consumer sentiment.”