JAKARTA (TheInsiderStories) – South Korea’ GDP growth rate moderated to a pace of 0.4 percent in third quarter (Q3) of 2019, according to the Advance Estimate of Q3 GDP released by the Bank of Korea, considerably softer than the 1.0 percent quarter of quarter (QoQ) GDP growth rate recorded in 2Q 2019.
Compared to a year ago, the 3Q GDP growth rate was 2.0 percent compared to last year (YoY), the same rate as in Q2 2019. The pace of GDP growth has moderated significantly compared to the 2018 calendar year, when South Korean GDP grew by 2.7 percen YoY.
The moderation in QoQ growth in 3Q 2019 reflected a significant slowdown in consumption expenditure, which rose by only 0.4 percent compared to last quarter, compared to rapid growth of 1.1 percent in 2Q 2019. Private consumption recorded only marginal growth of 0.1 percent in Q3 2019, compared to an increase of 0.7 percent in 2Q of 2019.
A contraction in gross fixed capital formation, which fell by 2.3 percent (QoQ), also contributed to the weak 3Q 2019′ GDP figure, with construction-related investment contracting by 5.2 percent.
While exports of goods rose by 4.9 percent in 3Q of 2019, helped by an upturn in exports of semiconductors and motor vehicles, nevertheless exports of goods in the third quarter still recorded a contraction of 0.5 percent YoY, the third consecutive quarter of contraction in the goods-exporting sector.
Rajiv Biswas, Asia Pacific Chief Economist at IHS Markit, rated South Korea’ export sector has been hit by a perfect storm during 2019 due to the impact of the US – China trade war on South Korean exports to China’ manufacturing sector, as well as the Eurozone manufacturing recession and the slump in global electronics orders.
The country’ exports have been very weak throughout the first ten months of 2019, with exports declining by 19.5 percent in annual basis during the first 20 days of October, according to Korea Customs Service data.
A key factor contributing to the weak performance of South Korean exports has been the global slowdown in electronics sector orders, as electronics exports are one of South Korea’ most important export industries. South Korea’ exports of semiconductors fell by 28.8 percent in the first 20 days of October.
Slowing Chinese orders for South Korean exports have been a key factor contributing to the weak export performance, with South Korean exports to China in the first 20 days of October showing a steep contraction of 20 percent from last year. China is South Korea’ largest export market, and accounted for around 27 percent of total South Korean exports in 2018.
The Bank of Korea’ decision to cut the policy rate by 25 basis points on Oct. 16, following an earlier rate cut in July, reflects growing concerns about South Korea’ economic growth momentum due to the softening global growth outlook and the weakness of South Korean exports during 2019 year-to-date.
The Bank has now cut policy rates twice this year, joining the growing number of central banks across the Asia-Pacific that have been easing monetary policy. Many APAC central banks have been cutting policy rates as softer world oil prices have reduced inflation pressures and concerns grow among Asian central banks about the weakening global growth outlook.
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