South Korea’s economy grew better-than-expected 1.1 percent in the first quarter, but worryingly hinging on the activity in selective exports of semiconductors and petrochemicals, while domestic consumption stayed stubbornly lackluster despite record government spending.
According to the preliminary data released by the Bank of Korea (BOK) on Thursday, the country’s gross domestic product totaled 395.93 trillion won ($366.5 billion) in the January to March period, gaining 1.1 percent from the previous quarter when it contracted 0.2 percent.
“If the quarterly GDP growth stays within 0.77 percent and 0.82 percent range, the economy would be moving towards the annualized growth target of 3.0 percent,” said Jung Gyu-il, director of BOK’s economic statistics team.
“But we would know better after we have seen the performance for the full first half,” he added.
In fact the rest of the data paints a gloomier picture.
Korean markets were stronger mostly because investors focused on Friday’s historic inter-Korean summit. On Thursday, the main Kospi closed up 1.10 percent at 2,475.64 and the Korean won down 0.3 at 1,080.9 against the U.S. dollar.
Facilities investment grew by 5.2 percent against a fall of 0.7 percent all thanks to upgrade and expansion in semiconductor lines. The on-quarter growth is the highest since the fourth quarter 2016.
Construction investment also gained 2.8 percent following a retreat of 2.3 percent in the last quarter of 2017, backed by aggressive government fiscal spending.
Exports expanded 4.4 percent from 5.3 percent drop in the previous quarter led by strong overseas demand for chemical and machineries. Imports grew 5.5 percent on quarter, mainly in the natural gas and machineries sectors.
Manufacturing output rose 1.9 percent on quarter due to robust activity in the component and machinery sectors. Agriculture, livestock, and fishery sector output increased 6.5 percent and construction 3.3 percent.
Service sector grew 0.9 percent on quarter with gains restricted in financial services and real estate service industries, while wholesale, retail sales, restaurant, and lodging areas all slumped.
Private consumption added 0.6 percent in the first quarter, slowing from 1.0 percent gain in the previous quarter.
Government spending, fueled by the biggest-ever budget, increased 2.5 percent from previous quarter’s 0.5 percent.
Gross domestic income in the first quarter after seasonal adjustment totaled 412.5 trillion won, gaining 1.8 percent on quarter to reverse from 1.3 percent decline in the previous three-month period due to strengthening in the Korean won. On yearly basis, GDI expanded by 2.2 percent, the lowest in 23 quarters.
(Source: Bank of Korea)
By Kim In-oh and Cho Jeehyun
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