Stuck to Low Growth

South Korea’s gross domestic income (GDI) decreased in five years due to deteriorating trading conditions.
South Korea’s gross domestic income (GDI) decreased in five years due to deteriorating trading conditions.

 

South Korea's gross domestic product (GDP) grew 0.7 percent in the second quarter this year. The figure corresponds with the market expectations of 0.6 percent to 0.7 percent. The nation’s quarterly economic growth stayed below 1 percent for three straight quarters since 0.7 percent in the fourth quarter last year.

Compared to the first quarter, it showed signs of recovery in domestic demand, facility investment and export. However, the gross domestic income (GDI) decreased in five years due to deteriorating trading conditions.

According to “2016 Q2 Real Gross Domestic Product” data released by the Bank of Korea (BOK) on July 26, the real GDP, seasonally adjusted for inflation, was up 0.7 percent from the previous quarter. The figure increased 0.2 percent point from 0.5 percent of the growth rate in the first quarter. 

On the expenditure side, private consumption grew 0.9 percent in the second quarter from the previous quarter, as expenditures on durable goods and semi-durable goods like clothing increased. Private consumption, which decreased in the first quarter in 9 months, turned around with the government’s measures to boost the domestic demand. 

Exports gained 0.9 percent in the second quarter from the prior quarter due to demand for semiconductors as well as oil and chemical products. Imports rose 1.9 percent, mainly on increases in crude oil and automobiles.

On the production side, agriculture, forestry and fishing production fell 6.1 percent, while manufacturing added 1.3 percent. Utilities were up 0.3 percent. Construction added 0.5 percent and Service collected 0.5 percent.     

Manufacturing industry rebounded in five quarters after recording -0.2 percent in the fourth quarter of 2014 and service industry maintained a similar growth with the previous quarter. However, agriculture, forestry and fishing production dropped as farming and livestock industries declined.

The GDI in the second quarter dropped 0.4 percent from the previous quarter, the first decline in five years and three months after -0.3 percent in the first quarter of 2011. This is largely due to the base effect from a 3.0 percent rise in the first quarter and worsened trading conditions from the decrease in the fall of oil prices.

 

 

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