South Korea’s economic growth speeds up in sign of resilience
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The economy has now grown for a second quarter since contracting in the last three months of 2022.
PHOTO: REUTERS
SEOUL - South Korea’s economic growth accelerated on the back of a pickup in manufacturing, offering a sign of resilience as the central bank keeps monetary policy restrictive.
Gross domestic product advanced 0.6 per cent in the three months until June from the previous quarter, Bank of Korea (BOK) data showed on Tuesday. Economists surveyed by Bloomberg forecast a 0.5 per cent expansion, after the 0.3 per cent advance in the previous period.
The economy has now grown for a second quarter since contracting in the last three months of 2022. The BOK has kept its key interest rate steady, with a hawkish bias, for most of 2023 as it seeks to balance its inflation fight with the need to safeguard economic activity.
The latest expansion gives the BOK scope for keeping policy tight as the US Federal Reserve is widely expected to hike rates
After being buffeted by an export slump since 2022, South Korea in June posted its first trade surplus in 16 months. Consumer confidence also breached the threshold of 100, indicating that optimism has returned among households.
But uncertainties about the strength of momentum remain. Early trade data showed exports in July falling at the fastest clip since March, and there are still uncertainties over the timing of any potential rebound in the key chip sector and a recovery of demand in China, South Korea’s biggest trading partner. Both the central bank and government recently slashed their growth forecasts for the year to 1.4 per cent.
On the price front, headline inflation eased for a fifth month in June, but gains in the core price gauge have proven stickier than expected. While the pace of inflation may slow in July, price growth is likely to accelerate again to the 3 per cent level around the end of the year, according to the central bank.
The BOK kept its key rate unchanged in July for a fourth straight meeting, while noting that its inflation battle is still not over. The bank has a target of 2 per cent inflation. BLOOMBERG
