South Korea’s economy narrowly expanded in the third quarter as consumer spending picked up, but exports declined, prompting the central bank to signal a potential revision to its 2024 growth forecast. The Bank of Korea’s preliminary estimate revealed a meager 0.1% growth in GDP for July-September, falling short of market predictions of 0.5% growth.
The sluggish growth poses challenges for Asia’s fourth-largest economy and may impact the won, which has depreciated around 5% against the dollar this month. With the central bank already revising down its full-year projection from 2.5% to 2.4% in August, further downgrades are anticipated.
Private consumption increased by 0.5% following a 0.2% decline in the previous quarter. Construction investment fell by 2.8%, while corporate investment surged by 6.9%.
Exports dropped by 0.4%, the first decline since 4Q22, while imports rose by 1.5%, resulting in a negative net contribution.
Park Sang-hyun, an economist from iM Securities, highlighted that the weakening export momentum and uncertain domestic demand pose challenges.
He anticipates a gradual reduction in interest rates, with the next cut expected in the first quarter of 2025, as immediate rate cuts are not being considered due to the external sector’s influence on economic activity.
