Seoul: South Korea’s economy expanded by a mere 0.1 percent in the third quarter of 2023, as sluggish export growth continues to weigh on the nation’s economic performance. This figure falls short of market expectations and raises the likelihood of additional rate cuts by the Bank of Korea (BOK), following its first rate reduction in over three years earlier this month.
According to Yonhap News Agency, the preliminary data released by the BOK highlighted that the growth rate for the July-September period was significantly lower than the anticipated 0.5 percent increase. This comes after a 0.2 percent contraction in the previous quarter and a 1.3 percent increase in the first quarter of the year. On an annual basis, the economy grew 1.5 percent in the third quarter, down from 2.3 percent in the second quarter.
The central bank data revealed that private spending showed a modest recovery, rising 0.5 percent on-quarter, following a 0.2 percent decline in the previous quarter. However, exports contracted by 0.4
percent, reversing the 1.2 percent gain seen in the prior quarter, while imports rose 1.5 percent, slightly down from a 1.6 percent increase.
Government spending increased by 0.6 percent, but construction investment fell by 2.8 percent, a deeper contraction than the 1.7 percent decline recorded in the previous quarter. A BOK official indicated that the country might fall short of the central bank’s growth forecast for the year, with further assessments scheduled for November.
With current trends, meeting the BOK’s annual growth forecast of 2.4 percent would require a 1.2 percent on-quarter growth in the final quarter. However, ongoing challenges such as weakened IT exports and geopolitical tensions may impede achieving this target.
Earlier this month, the BOK reduced its key interest rate by a quarter percentage point to 3.25 percent, moving away from its previous restrictive monetary stance. The bank had previously implemented seven consecutive rate hikes from April 2022 to January 2023 to combat high inf
lation.
South Korea’s economic growth has slowed to the lowest level in three years, primarily due to a downturn in exports amid global monetary tightening. The economy grew by 1.4 percent last year, following a 2.6 percent rise in 2022 and a 4.3 percent increase in 2021, marking the lowest growth since the 0.7 percent contraction in 2020 during the COVID-19 pandemic.