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Exports, eased quarantine rules to boost economy in Q4
By Lee Min-hyung
Korea is feared to miss its GDP growth target of 4 percent this year, data showed Tuesday, due to a pandemic-sparked slowdown in private consumption and escalating uncertainties surrounding global supply bottlenecks.
The Korean economy grew 0.3 percent in the third quarter compared to the previous quarter, attributed to a decline in private consumption and facility investments, according to data from the Bank of Korea (BOK).
The central bank expected Korea to achieve its earlier growth target if the GDP grows 1.04 percent year-on-year in the fourth quarter.
But exports rose 1.5 percent led by petrochemical and machinery products, helping offset weak growth in domestic consumption, particularly in the service sector. According to the central bank, private consumption and facility investments declined 0.3 and 2.3 percent, respectively, during the same period.
Korea's economy still has to rely on export growth in the last quarter to achieve the 4 percent growth target, as pandemic-related variables continue to limit the recovery of private consumption.
But the BOK and the government consider the goal "still within reach."
"The 0.3 percent GDP growth in the third quarter is not a worrying level, even if it is still lower than earlier market outlook of 0.46 percent," Hwang Sang-pil, director general of the BOK's economic statistics department, told reporters during an online press conference. "This was affected by the drop in private consumption amid the resurgence of COVID-19 infections and global supply-chain bottlenecks."
The BOK official, however, expected the economy to be on track for a robust recovery next month, when the government is set to embrace the so-called "Living with COVID-19" strategy in phases.
"The introduction of the new quarantine measures will contribute to the economic recovery by expanding private consumption in the service industry," Hwang said. The government's extraordinary budget spending will also help revitalize consumption here, according to Hwang.
Finance Minister Hong Nam-ki also voiced optimism over the rapid recovery of export growth.
"Exports continued to report high growth up until recently, and this is a positive factor for a solid economic recovery this year," Hong said. According to data from the Korea Customs Service, exports surged 36.1 percent so far this month compared to last October.
A phased easing of tough social distancing rules will help private consumption to recover, Hong said. "But uncertainties still remain in place due to fears over economic slowdowns in the U.S. and China."
A weakening growth momentum of the Chinese economy has particularly emerged as a fear factor amid concerns that the slowing growth of the world's second-largest economy may end up holding back growth here, as China is one of the biggest trading partners of Korea.
Economists, however, argued it is too early to say that Korea's exports to China have entered a path of decline.
"China's recent power outage issue may have had a negative impact on industrial production, but we have not yet found any signs that this affected Korea's exports to China," Meritz Securities economist Lee Seung-hoon said. "Exports to China reached $3.9 billion during the first 10 days of October, slightly below the average figure of $4.7 billion since July. But this is a temporary trade contraction induced by China's public holiday season that fell around late September and early October."
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