Nearing Annual 3% Growth
The Bank of Korea announced on October 26 that South Korea’s real GDP grew 1.4% quarter on quarter in the third quarter of this year. The rate of growth is an 87-month high and it was led by exports and government budget execution.
In the third quarter, South Korea’s total exports increased 6.1% from a quarter earlier, reaching a 78-month high. Its net exports accounted for no less than 0.9 percentage points out of its real GDP growth during the period. For reference, the quarter-on-quarter export growth rate had been negative 2.9%, the lowest level since the fourth quarter of 2011, in the second quarter of this year.
In the following quarter, semiconductor and chemical product and automobile exports led the export growth. For example, semiconductor exports hit an all-time high of US$9.69 billion in September. The export growth rate amounts to 29.3% even after the semiconductor exports are excluded from the calculation.
During the same period, the government spending showed an increase of 2.3% based on supplementary budget execution. The figure had been 1.1% in the previous quarter. The Bank of Korea explained that the ratio of the executed supplementary budget to the total exceeded 70%.
Construction investment showed some recovery. The rate of increase in construction investment had dropped from 6.8% to 0.3% from the first quarter to the second quarter but rebounded to 1.5% based on the government’s concentrated SOC investment.
The rate of increase in private spending fell from 1.0% to 0.7% from the second to third quarter. Still, the figure for the third quarter rose 2.4% from a year ago. “Private spending is showing a gradual recovery these days as North Korea risks are showing some signs of easing,” the central bank continued to say, adding, “Capital investment increased 0.5% in the third quarter, much lower than 5.2% of the preceding quarter.”
According to the central bank, South Korea posted an economic growth rate of 1.1% and 0.6% in the first and second quarters of this year, respectively. Under the circumstances, the country is likely to show an annual growth of at least 3.0% at the end of this year.