South Korea’s economy is experiencing growth at a steady rate, with an increase of 0.6% in the last quarter, matching the expansion seen in the previous three months. The semiconductor sector played a significant role in this growth, indicating that global trade is healthy. However, household consumption weakened, and retail sales data showed continued weakness in consumer spending.
Moving forward, economists predict that consumer demand will remain a challenge for the economy. High interest rates and a cooling labor market are expected to weigh on demand. On the other hand, the manufacturing sector and exports are predicted to remain strong, driven by global demand for semiconductors. This could offset any struggles in global growth in the short term.
On a year-on-year basis, GDP is forecasted to have expanded by 2.4% in the last quarter, faster than the previous quarter. This marks South Korea’s fastest growth rate since Q3 2022. However, concerns about uneven growth in China, South Korea’s largest trading partner, could impact the ongoing recovery. Additionally, high levels of debt and interest rate hikes by the Bank of Korea have constrained spending further affecting consumption.
The central bank has indicated that it will only consider lowering borrowing costs once inflation moves closer to its target of 2%. In March, inflation was at 3.1%, adding to pressure on consumption. Despite these challenges, South Korea’s economy remains resilient due to strong export performance.
In conclusion, while South Korea’s economy continues to show resilience through strong export performance
