Thanks to Low Base Effect
The South Korean economy grew 1.9 percent on quarter in the third quarter of this year after a negative growth of 1.3 percent in Q1 and 3.2 percent in Q2. The Bank of Korea explained that the Q3 growth rate is mostly because of the base effect and the economy actually contracted by 1.3 percent in one year.
The central bank announced on Oct. 27 that the Q3 real GDP increased 1.9 percent from the previous quarter and the figure is the highest since the first quarter of 2010. The bank estimated this year’s growth at negative 1.3 percent in August. The goal can be met if the Q4 growth rate is somewhere between 0 percent and 0.4 percent.
In the third quarter, exports increased to raise the growth rate. Specifically, South Korea’s exports increased 15.6 percent, the highest rate of increase since the first quarter of 1986, and this was led by automobile and semiconductor exports. For reference, the exports dropped 16.1 percent in the wake of COVID-19 in the previous quarter. Its imports rose 4.9 percent, led by crude oil and chemical products, and capital expenditures rose 6.7 percent.
Meanwhile, the private consumption growth rate dipped below zero percent again after a 1.5 percent increase in the previous quarter. The construction investment fell 7.8 percent with civil engineering and construction shrinking in the rainy typhoon season.
“When the GDP in the first quarter of last year is regarded as 1.0, the South Korean economy reached 1.027 in the last quarter of last year, remained below zero in the first half of this year, and then just touched 1.001 last quarter,” the central bank explained, adding, “In short, a V-shaped recovery is still distant.”