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Economist at UOB Group Ho Woei Chen, CFA, assesses the latest Q4 GDP figures in South Korea.

Key Quotes

“South Korea’s GDP contracted for the third straight quarter at -1.4% y/y in 4Q20 (3Q20: -1.1% y/y)… Overall, the economy contracted by -1.0% in 2020, the first full-year decline since the Asian Financial Crisis when GDP fell -5.1% in 1998.”

“The positive growth momentum has eased with quarter-on-quarter (q/q) seasonally adjusted growth at 1.1% in 4Q20 compared to 2.1% gain in 3Q20. This was led by a pullback in private consumption demand by -1.7% q/q (3Q20: 0.0%) as the country tightened social distancing measures amidst a new coronavirus outbreak.”

“Recovery in global demand from successful vaccine rollout, sustained strength in the semiconductor industry as well as accommodative fiscal and monetary policies will all contribute towards a stronger economic rebound in South Korea this year.”

“We expect the outlook to gradually improve with export and investment remaining the key growth drivers while the weak labour market is likely to continue to weigh on private consumption until economic activities normalise. South Korea’s COVID-19 vaccination program will kick off in February. President Moon Jae-in has said that herd immunity in the country could be achieved as early as September which would then allow for a stronger private consumption and labour market outlook in the later part of the year. For 2021, we are keeping our forecast for South Korea’s GDP rebound at 3.3%, with quarterly GDP to turn positive starting from 1.2% y/y in 1Q21. Earlier this month, BOK has maintained its GDP growth forecast for this year at 3.0%.”