South Korea’s economic growth holds steady on exports as risks loom
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Chip have started to bottom out, kindling hopes that resurgent technology demand will once again drive South Korea’s exports.
PHOTO: BLOOMBERG
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SEOUL – South Korea’s economic growth held steady on the back of recovering exports, offering a sign of resilience as the central bank keeps monetary policy restrictive and sundry risks loom.
Gross domestic product (GDP) advanced 0.6 per cent in the three months to the end of September from the previous quarter, Bank of Korea (BOK) data showed on Thursday.
Economists surveyed by Bloomberg had forecast a 0.5 per cent expansion after growth came in at 0.6 per cent in the three months up to and including June. The momentum in trade may accelerate in October to December.
Early exports returned to growth for the first time in more than a year in the first 20 days of October, indicating the return of external demand that may help sustain the positive impact on GDP arising from net exports.
Semiconductor prices are starting to bottom out, kindling hopes that resurgent global technology demand will once again drive South Korea’s exports.
SK Hynix, Korea’s second-biggest chipmaker, reported third-quarter sales that topped consensus
Samsung Electronics recently reported a more moderate decline
There are question marks as well.
With an economy highly sensitive to changes in global energy prices and consumer demand, the South Korean authorities face a myriad of risks, ranging from the potential fallout of the Israel-Hamas conflict to the simmering geopolitical rivalry between the United States and China.
BOK governor Rhee Chang-yong remains confident the economy will grow around 1.4 per cent in 2023 as forecast, but he noted this week that the Middle East tumult may force the bank to overhaul its 2.2 per cent growth outlook for 2024.
“If the conflict continues into next year, it could drive up inflation, denting consumer purchases and therefore growth,” said KB Kookmin Bank chief economist Chang Jaechul.
“It’s still too early to fold this into an economic outlook. For the time being, the third-quarter growth isn’t too bad.”
In the meantime, China, a key export destination, is still working on reviving its economic recovery.
Beijing is also tightening its export controls related to graphite, alarming South Korean manufacturers who rely on China as a source of the material used to make electric vehicle batteries.
Facilities investment fell by 2.7 per cent in the latest period, reflecting caution at corporations.
Safeguarding economic momentum is crucial for President Yoon Suk-yeol’s government ahead of parliamentary elections in April 2024 that will determine the extent of legislative support for his agenda for the remainder of his single term that began in May 2022.
Mr Yoon’s five-year tenure began with a Parliament controlled by the opposition, and his party’s defeat in a by-election in a Seoul district earlier in October further weakened his position. BLOOMBERG
