South Korea records decade high economic growth at 5.9pc from low base

Tuesday, July 27, 2021

South Korea's economy expanded at the fastest annual pace in a decade in the second quarter, thanks to a pick up in private consumption, though a resurgence of coronavirus casts doubt over the outlook for growth for the rest of the year, Reuters reports.

Data from the Bank of Korea on Tuesday showed gross domestic product (GDP) grew by 0.7 percent in the second quarter, after rising by 1.7 percent three months earlier and matching 0.7 percent growth tipped in a Reuters survey.

The economy surged by 5.9 percent year-on-year, the fastest growth in a decade and up sharply from 1.9 percent in the first quarter, in part because of the low base effect of last year but also driven by strong exports and imports as major trading partners continued to reopen.

That, however, missed market forecast growth of 6 percent for the annual reading.

The result would be no surprise for the BOK, which is expected to be the first Asian central bank to raise interest rates from pandemic-era lows, as growth and inflation return.

But economists see the pace of growth slowing in the third quarter as the government brought in its toughest coronavirus restrictions yet to contain the worst outbreak in the country.

While exports surged by 22.4 percent on-year, they declined by 2 percent from the previous quarter and became a net drag on economic output in the second quarter, suggesting growth may plateau in the months ahead.

"We record exports in volume terms, not in terms of value, which should help explain the slight decline in exports, as export prices have been increasing quite a lot. Also, a shortage of chips for cars also dragged production," said Park Yang Su, head of statistics department at the BOK.