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Economic growth

Korean economy rebounds in Q3 on exports; challenges ahead

By Oct 27, 2020 (Gmt+09:00)

South Korea’s economy returned to growth in the third quarter on strong exports, marking the first quarterly expansion since the outbreak of the COVID-19 pandemic.

Gross domestic product (GDP) expanded 1.9% in the July-September period from the preceding quarter, the fastest pace in two and a half years, according to preliminary data from the Bank of Korea on Oct. 27.

The expansion follows two consecutive quarters of contraction. In the second quarter, Korea’s GDP shrank 3.2% quarter on-quarter after posting a 1.3% contraction in the first quarter.

South Korea's economy returns to growth in the third quarter 
South Korea's economy returns to growth in the third quarter 

The central bank attributed the return to growth to brisk exports, which jumped 15.6% from the prior quarter. Investments in production facilities also gained 6.7% on quarter.

While the pandemic-caused trade slump eased with advanced nations lifting lockdown steps, Korea’s local spending remained weak due to the resurgence of the coronavirus in mid-August.

Private consumption and construction investments fell 0.1% and 7.8%, respectively, in the third quarter from the previous quarter.

To boost the local economy, the government has so far spent at least 67 trillion won ($59.3 billion) in four batches of extra budgets.

CHALLENGES AHEAD

The Korean economy, Asia’s fourth largest, recently gained traction with exports returning to growth for the first time in seven months in September, but still faces challenges from the prolonged global pandemic.

Year on year, the Korean economy shrank 1.3% in the third quarter following the prior quarter's 2.7% contraction.

The BOK expects the economy to shrink 1.3% for 2020, which would be its worst annual performance since the 1998 Asian financial crisis. The central bank has kept its policy rate at a historic low of 0.5% to support growth.

Write to Ik-Hwan Kim at lovepen@hankyung.com

In-Soo Nam edited this article.

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