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Economist at UOB Group Ho Woei Chen, CFA, assessed the prospects of GDP growth for the current year in South Korea.


Key Quotes


“South Korea’s advance 3Q20 GDP bounced back to positive sequential growth at seasonally adjusted 1.9% quarter-on-quarter… after two preceding quarters of contraction. On a year-on-year (y/y) comparison, the economy remained in contraction at -1.3% in 3Q20… the main drags came from private consumption (-2.2% point) and inventories (- 0.9% point) while positive contributions to the headline y/y GDP were seen from capital investment (+0.8% point), government spending (+0.7% point) and net exports (+0.3% point).”


“Overall, the recovery in 3Q20 was supported by the large fiscal response, including the 4th supplementary budget (KRW7.8 trillion) that was passed in late-September. The four supplementary budgets introduced since March have totaled KRW66.8 trillion (3.4% of GDP), on top of the financial support package and jobs programs. Worries over a fresh round of the pandemic outbreak will continue to hamper the private consumption recovery. The seasonallyadjusted unemployment rate came off a high of 4.5% in May to 3.9% in September aided by the government’s support measures but is likely to remain elevated for the rest of the year.”


“While South Korea economy may have seen the worst, the recovery will continue to be slow given the pandemic threat and that major economies in Europe and the US are still battling the COVID-19 outbreak. We expect the recovery momentum to remain in place but GDP will likely remain in y/y contraction in 4Q20. Assuming no major changes to the advance 3Q20 GDP, our revised outlook is at -0.6% y/y for 4Q20 with full-year GDP contraction at -0.8% compared to -1.3% previously. We maintain our forecast for a recovery in growth to 3.5% in 2021 as the COVID-19 pandemic comes under control leading to resumption in businesses and travel.”