)
In the latest quarter, the South Korean economy is expected to have grown at a pace of 0.6%, maintaining its momentum from the previous three months, according to a Reuters poll of economists. This growth was driven by improving exports, particularly in the semiconductor sector, which is a strong indicator of global trade health.
Despite this positive export performance, concerns remain about weakening household consumption. Retail sales data from January and February indicate continued weakness in spending, which has been identified as a weak point in the economy. Factors such as elevated interest rates and a cooling labor market are expected to weigh on demand further.
The Bank of Korea (BOK) has implemented a cumulative 300 basis points of interest rate hikes since August 2021, which has restrained spending in the economy. The central bank has indicated that it needs to see inflation moving towards the 2% target before considering lowering borrowing costs. With inflation at 3.1% in March, there is likely to be continued pressure on already slowing consumption in the South Korean economy.
On a year-on-year basis, GDP was expected to have expanded 2.4% last quarter, faster than the 2.2% growth in the preceding quarter. This could be the fastest growth rate since Q3 2022. However, concerns remain about uneven growth in China, South Korea’s biggest trading partner, affecting the ongoing recovery of the South Korean economy.
According to economists polled by Reuters
