S. Korea’s GDP grows 1.2% in Q3

23 Oct 2015


South Korea, Asia's fourth-biggest economy, expanded at a rate of 1.2 per cent in the third quarter over the previous quarter, registering its fastest pace in five years, driven by government stimulus and increased consumer spending.

According to the advance estimate released by Bank of Korea, the country's central bank, the gross domestic product (GDP) grew by 2.6 per cent year-on-year in the quarter.

Economic growth was at a dismal six-year low of 0.3 per cent in the second quarter, weighed down by the outbreak of the deadly Middle East respiratory syndrome affecting its tourism industry. The GDP had posted a 0.8-per cent expansion in the March quarter.

Private consumption increased by 1.1 per cent in Q3, driven by increased spending on durables and services, from a 0.2 per cent decline in the previous quarter. Government spending rose by 1.9 per cent compared to 0.8 per cent in Q2.

Construction investment rose 4.5 per cent, while investment on facilities which include machinery and equipment grew 2 per cent and investment in intellectual property products increased 0.2 per cent.

Exports continued to fall due to the slowdown in China, the world's second-largest economy posting a 0.2 per cent decline as shipments of LCDs, chemicals and ships dropped.

About a quarter of S.Korea's exports are bound for China, which recorded a 6.9-per cent in Q3, the country's slowest growth in six years.

Imports grew 1.3 per cent as trade in petroleum and coal products and electrical and electronics equipment increased in the quarter.

Earlier this month, the central bank has trimmed the country's growth forecast to 2.7 per cent this year, and for next year, the GDP growth is estimated to be 3.2 per cent. The country's economy grew at a rate of 3.3 per cent in 2014.

Unemployment rate is expected to rise to 3.7 per cent in 2015 from 3.5 per cent last year.

The government increased spending by passing a $10-billion supplementary budget in July and slashed consumption tax temporarily in its efforts to stimulate economic growth.

The central bank has cut the key interest rate for a second time this year to a record low of 1.5 per cent from 1.75 per cent in April and 2 per cent in January, to help boost credit growth.

Nevertheless, economists believe the growth momentum in the export-oriented economy, where exports account for over half of the GDP, may not sustain in the longer term in case the Chinese slowdown and global demand growth remain subdued.

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