By Rahul Trivedi
BENGALURU (Reuters) – The South Korean economic system possible returned to development final quarter after a gentle contraction within the prior quarter because of an export-led enlargement that offset larger borrowing prices squeezing home demand, a Reuters ballot discovered.
After an sudden 0.2% contraction within the April-June quarter, Asia’s fourth-largest economic system was projected to have grown a seasonally adjusted 0.5% within the third quarter, in response to a median forecast from 23 economists.
On an annual foundation, the economic system expanded 2.0% final quarter, in response to the median forecast of 26 economists polled Oct. 15-21, down from 2.3% within the earlier quarter.
“We anticipate…Q3 GDP information to point out lackluster development. Whereas exports remained strong, sluggish home demand, as mirrored by varied high-frequency indicators, together with retail gross sales and development, was a drag,” stated Khoon Goh, head of Asia analysis at ANZ.
South Korea’s month-to-month exports have grown by virtually 10% this 12 months on common as much as September, largely pushed by semiconductor demand from the US, serving to the trade-dependent economic system keep away from a technical recession generally outlined as two consecutive quarters of contraction.
Nevertheless, the tempo of export development has cooled in latest months as commerce moderated with China – South Korea’s prime buying and selling accomplice – in addition to Japan and India.
Excessive borrowing prices are impacting home consumption amid family debt ranges which can be among the many highest within the developed world.
In a bid to revive ailing demand, the Financial institution of Korea (BOK) lower its coverage price by 25 foundation factors this month from a 15-year excessive of three.50%.
Nevertheless, the BOK is anticipated to keep up its present stance for the remainder of the 12 months and solely lower 50 foundation factors subsequent 12 months, whereas the U.S. Federal Reserve is anticipated to scale back charges by 150 foundation factors by end-2025, in response to separate Reuters polls.
“A modest rebound in GDP development ought to assist the BOK pivot that we noticed on the October assembly, however a back-to-back price lower in November is unlikely, in our view, given the lingering considerations on the housing market,” stated Suktae Oh, chief Korea economist at Societe Generale (OTC:).
Amid an uneven restoration in China, and slowing demand from the U.S., South Korea’s financial development was anticipated to common 2.4% this 12 months, aligning with the central financial institution’s downwardly revised forecasts.
