October 27, 2023
SEOUL – The Korean economy grew 0.6 percent in the third quarter from the previous three months, continuing a slow yet steady recovery with both exports and private consumption inching up.
The country’s gross domestic product, a key measure of economic growth, grew 0.6 percent on-quarter in the July-to-September period, according to the Bank of Korea’s preliminary data released Thursday.
The local economy has been on a recovery path since its lowest when it contracted by 0.3 percent in the fourth quarter of last year, followed by an on-quarter growth of 0.3 percent and 0.6 percent in the first and second quarters, respectively.
By sector, private consumption bounced back, growing 0.3 percent from the 0.1 percent contraction in the previous quarter. Government spending grew 0.1 percent, while construction investment expanded 2.2 percent after experiencing a 0.8 percent dip in the second quarter.
Exports, which the domestic economy is heavily reliant on, grew 3.5 percent in the third quarter, recovering from a 0.9 percent fall in the second quarter, driven by shipments of semiconductors and machinery.
As suggested by Thursday’s data, Korea’s exports have been showing recovery. The latest data from the Korea Customs Service shows Korea’s exports rose 4.6 percent on-year in the first 20 days of October, reaching $33.8 billion.
Along with the outbound shipments, imports increased 2.6 percent from the previous 3.7 percent contraction due to surging international oil prices sparked by a decision by major producers to cut production.
Facilities investment was the only sector to experience a decline, contracting 2.7 percent, after a 0.5 percent growth in the preceding three months.
“The IT economy, including the chip industry, is on recovery, contributing to growth as it steps out of an export slump,” Shin Seung-cheol, director of the economic statistics department at the BOK, said at a press briefing held Thursday.
“It seems as if the planned expansion of semiconductor facilities for this year has wrapped up, seeing the decline in equipment for semiconductor manufacturing,” Shin said. “But we expect growth next year as planned construction is coming (online).”
Though the economy has been growing for three straight quarters, it may not be easy for Korea to maintain the growth momentum in the fourth quarter and reach the 1.4 percent growth projection for 2023 made by the BOK earlier in August.
The Korean economy grew 0.9 percent in the first half of this year from the same period last year. The yearly growth rate will come to 1.4 percent mathematically, if the quarterly growth reaches 0.7 percent in the October-December period, the BOK estimated.
The local economy, however, is threatened by heightened volatility due to the rising geopolitical tension from the Middle East and restrictive monetary tightening policy practiced by major economies around the world.
“The IT industry is projected to slowly recover from an export slump and contribute to growth, but the uncertainty has escalated due to the geopolitical risk from the Israel-Hamas conflict and the effects of the US’ high rates on Korea’s financial, real economy,” Shin said.
Finance Minister Choo Kyung-ho assessed the quarterly economic growth rate is moving in accordance with the ministry’s projected trajectory. The Korean government forecast the domestic economy will recover in the second half of this year and start recovery in full swing next year.
“(The figure) is moving on the projected path,” Choo said at the parliamentary audit Thursday. “The government projects a 1.4 percent growth rate for this year — pessimistically 1.3 percent and optimistically 1.5 percent.”