South Korea Growth Outlook Remains Weak


Recent data updates for South Korea are pointing to a slower growth in the months ahead. Although domestic consumption is likely to support expansion as consumer confidence is on the rise and inflation is declining; industrial production and exports may decrease further, given still weak global demand.

 
In Q1 of 2013, the GDP accelerated 0.8 percent qoq, its fastest pace in a year, boosted by exports and construction investments. GDP was up by 1.5 percent yoy, the same rate as in Q4 of 2012.
 
In June, exports shrank 0.97 percent yoy, the first annual contraction in four months. Although shipments to the three key markets rose, overall exports declined, mainly due to fewer working days in June and lower exports to Japan as a result of the yen's depreciation.
 
In June, business sentiment decreased to 79 index points, due to lower confidence among manufacturers about exports and profits. In May, industrial production contracted by 1.4 percent yoy, after expanding by 1.6 percent in the previous month.
 
Since the beginning of the year, inflation has been on a downward trend and remained unchanged at 1 percent in June. On July 11th, the Bank of Korea maintained the benchmark interest rate at 2.5 percent.
 
Since the beginning of the year, consumer outlook has been rising. In June, consumer confidence increased to 105 index points, the highest value in thirteen months, as households were more confident in future improvement in domestic conditions. Retail sales, which have been weak since the second half of 2012, expanded by 0.5 percent yoy in May.
 
After gaining more than 8 percent against the US dollar in 2012, the Korean won depreciated almost 5 percent against the greenback in the last seven months, due to geopolitical risks and outflows of foreigner stock investment funds.



Joana Taborda | joana.taborda@tradingeconomics.com
7/23/2013 4:43:06 PM