South Korea’s economy expanded 1.6 per cent quarter-on-quarter in the first three months of the year, signalling a faster-than-expected recovery to pre-Covid-19 levels, central bank data showed on April 27.
Bolstered by improvement in private consumption and exports, “the 1.6 per cent growth in the first quarter has pushed the real gross domestic product (GDP) level higher than that of the last three months of 2019,” Park Yang-su, head of the economic statistics department at the Bank of Korea (BoK), said in a briefing tied to the data.
On a quarterly basis, South Korea’s economy has recovered slowly since the third quarter of last year. After contracting 1.3 per cent in the first quarter of 2020 and 3.2 per cent in the second, it began to show signs of recovery in the second half. It expanded by 2.1 per cent in the third quarter and 1.2 per cent in the fourth.
The country’s GDP expanded 1.8 per cent year-on-year in the first quarter of 2021.
A noticeable recovery in private consumption, which had faltered due to the government’s strict social distancing rules, buoyed the rebound in GDP, data showed.
Consumption of durable goods such as cars and nondurable goods, such as groceries and clothing, increased by a combined 1.1 per cent quarter-on-quarter in the January-March period. This compares with the corresponding figures of zero per cent and minus 1.5 per cent in the third and fourth quarters of last year.
“The increased gift exchanges that replaced face-to-face gatherings during the Lunar New Year holidays in February and alleviation of social distancing rules around that time improved consumption in businesses and services that require offline interactions,” Park said.
The BoK cast a rosier outlook on private consumption, projecting further gains stemming from an improved job market, but warned that risks tied to Covid-19 had not disappeared and sectors that required face-to-face services were still vulnerable.
Exports expanded 1.9 per cent quarter-on-quarter in the January-March period, while imports increased 2.4 per cent. Exports, which account for half of Asia’s fourth-largest economy, expanded 4.5 per cent year-on-year, but shed some quarterly momentum in the first three months of the year. They had seen 5.4 per cent quarter-on-quarter growth in the last three months of 2020.
“The growth itself has become slower compared with the fourth quarter of last year, but a recovery in the IT economy and the overall global economy is expected to continue to drive Korea’s exports,” Park said.
The 1.6 per cent GDP growth exceeded market expectations, as think tanks and brokerages had projected 1.2 per cent expansion on average.
But the BoK and experts alike have stressed the need for an accelerated vaccination campaign to truly back their optimistic outlooks. As of April 27 a meagre 4.7 per cent of the population, or 2.4 million people, had received one dose of the Covid-19 vaccine.
Meanwhile, Minister of Economy and Finance and Deputy Prime Minister Hong Nam-ki on April 27 nodded toward the BoK data, saying: “Korea’s economy saw a faster-than-expected recovery toward pre-pandemic levels.”
Hong projected that the economy would surpass the government’s latest growth forecast of 3.2 per cent for this year, citing the data as a “solidification of steps” toward mid- or high three per cent growth.
BoK governor Lee Ju-yeol recently projected that the growth rate would reach the mid-three per cent range.
THE KOREA HERALD/ASIA NEWS NETWORK