South Korea’s economy posted improved growth in the second quarter on increased exports and consumption, central bank data showed Tuesday. It was in line with a median 0.7 per cent gain on a seasonally adjusted basis tipped in a Reuters survey of 18 analysts.
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Facility investment rebounded from a 7.4 percent decline in the first quarter to a 2.9 percent expansion in the second quarter, but investment in the construction sector rose 2.9 percent during the April-June period, less than halving a 6.8 percent growth in the previous three-month period.
It was up from a 0.5 percent quarterly expansion tallied in the first quarter, but the second-quarter figure marked the zero-percent growth for the third consecutive quarter.
“The third quarter is likely to be sluggish as well”.
Although Tuesday’s news offered some hope as Asia’s fourth-largest economy struggles to escape low growth, an ongoing overhaul of the country’s shipping and shipbuilding industries may prove a hurdle as tens of thousands of jobs are expected to be lost in the process. Exports have kept falling since January a year ago while domestic consumption has also shown signs of weakening.
Construction added 0.5 percent, centering on residential building construction. The BOK, which lowered its key interest rate to a record 1.25 per cent in June, estimates the cut and supplementary budget will boost the growth rate by 0.2 percentage point.
Bank of Korea estimates showed private consumption rose by a seasonally adjusted 0.9 per cent in the second quarter after slipping 0.2 per cent in the January-March period, thanks to demand for semi-durable goods like clothing. The gain was attributed to an increase in transport equipment investment.
“The challenges that lie ahead for the South Korean economy in terms of the scope of corporate debt restructuring in a low-trade environment (and with monetary policy nearing its lower limit) are formidable”, ANZ said in a note.
“People bought cars before the tax benefit expires, and continued housing construction also supports GDP”, Stephen Lee, an economist for Samsung Securities Co.in Seoul, said before the data was released.
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The Kospi Index is up for a second straight day in early trading on Tuesday, though the benchmark is only up roughly 3% so far this year.
