GDP edges up 0.6% in Q2 as imports dip faster than exports
Containers are stacked up at a port in Busan, Friday. Yonhap
Real GNI drops 0.7%
By Yi Whan-woo
The Korean economy expanded 0.6 percent in the second quarter from the previous three months, as imports dropped at a faster rate than exports, the Bank of Korea (BOK) said Tuesday. It was the fastest quarterly growth since the second quarter of 2022, when the Korean economy grew 0.8 percent.
Compared to a year ago, gross domestic product (GDP) grew 0.9 percent during the second quarter.
The growth seen during April to June follows a 0.3 percent expansion in the first three months of this year, resulting in a 0.9 percent growth in Korea's GDP in the first half.
Real gross national income (GNI) dropped 0.7 percent on worsening trade terms.
Under the circumstances, whether Asia's fourth-largest economy can reach an annual growth target of 1.4 percent forecast by the Korean government and the central bank is still questionable, according to analysts.
They noted that the quarterly expansion was mainly driven by a faster decline in imports than exports.
Imports tumbled 3.7 percent, compared to a 0.9 percent decrease in exports.
Correspondingly, net exports increased Korea's GDP by 1.4 percentage points.
“The reliance on declining imports for a GDP expansion is apparently problematic, because it means growth momentum will diminish once imports increase faster than exports,” said Lee Sang-ho, head of the economic policy team at the Korea Economic Research Institute (KERI).
Imports fell as reserves of crude oil and natural gas from the first quarter remained sufficient and expenditures on energy decreased in the second quarter as a result.
Exports shrank in the second quarter as demand for petroleum products weakened and offset increased demand for semiconductors and cars.
Kwon Nam-hoon, a Konkuk University economics professor, cast doubt over the government's hope of the economy bouncing back in the latter half of this year, pointing out that private spending fell 0.1 percent in the second quarter.
Government spending also retreated 2.1 percent over the same period.
Kwon said inflation could possibly prevent domestic consumption from recovering in the remainder of 2023, referring to consumer prices rising at a faster-than-expected pace of 3.4 percent in August after falling to a 25 month-low of 2.3 percent in July.
“Heavy rainfall in July resulted in the price hikes of weather-sensitive goods, such as fruit and vegetables in August,” he said.
He added that an economic recovery in the second half of this year also presumes a spillover effect from China's reopening, which he said is “unlikely considering it is now facing a property crisis.”
Joo Won, deputy director of the Hyundai Research Institute, said a persistently high benchmark interest rate of 3.5 percent also affects private spending.
In particular, he noted that real gross national income (GNI), a gauge of purchasing power, dropped 0.7 percent quarter-on-quarter in the April-June period.