© Reuters. File picture: On May 28, 2020, in Seoul, South Korea, people wearing masks walked in the Myeongdong shopping district in order to avoid the spread of coronavirus disease (COVID-19). REUTERS/Kim Hong-Ji
Seoul (Reuters)-South Korea’s economy grew at the fastest rate in a decade in the second quarter due to a rebound in private consumption, although the resurgence of COVID-19 made people doubt the growth prospects of the rest of the year.
Data released by the Bank of Korea on Tuesday showed that the gross domestic product (GDP) increased by 0.7% in the second quarter, and increased by 1.7% three months ago, matching the 0.7% growth predicted by the Reuters survey.
The economy grew by 5.9% year-on-year, the fastest growth rate in ten years. It was a sharp increase from 1.9% in the first quarter. This was partly due to the low base effect last year, but it was also driven by the strong import and export as a major trade partner to continue to reopen. .
However, this is lower than the market’s forecast growth of 6.0% of the annual reading.
With the return of economic growth and inflation, the Bank of Korea is expected to become the first Asian central bank to raise interest rates from lows during the pandemic, and the results will not be surprising.
But economists believe that the growth rate in the third quarter will slow as the government has implemented the strictest coronavirus restrictions to date to contain the country’s worst epidemic.
Although exports increased by 22.4% year-on-year, they were down 2.0% from the previous quarter and became a net drag on economic output in the second quarter, indicating that growth may stabilize in the coming months.
“We record exports by volume rather than value. This should help explain the slight decline in exports because export prices have been rising sharply. In addition, the shortage of automotive chips has also dragged down production,” said Park Yang -su, South Korea The head of the central bank’s statistics department.
SK Hynix, the world’s second-largest memory chip manufacturer, announced its highest quarterly profit since the end of 2018 on Tuesday, while the Korean steel manufacturer Pohang Steelers (New York Stock Exchange:) The highest quarterly profit in history was announced last week.
The main drivers of growth in the second quarter were private consumption and government spending, which increased by 3.5% and 3.9% respectively from the previous quarter.
Finance Minister Hong Nam-ki said in a post on Facebook (NASDAQ:) on Tuesday that the government will soon release measures to promote consumption to help those hit by the latest virus containment measures, using 34.9 trillion won (30.36 billion U.S. dollars) Additional budget expenditures for pandemic relief packages.
Nevertheless, some economists are lowering their growth forecasts for the country.
Capital Economics macro economist Alex Holmes said: “In view of the fact that growth is not as strong as we expected, we lowered our full-year forecast from the previous 5% to 4.3%.”
“We don’t think there is anything in the data to persuade the Bank of Korea to postpone the first interest rate hike. We insist on our non-consensus view of action in late August.”
(1 USD = 1,149.6500 KRW)
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