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South Korea's economy likely lost some steam in Q3, cooling China a worry: Reuters poll

South Korea's economy likely lost some steam in Q3, cooling China a worry: Reuters poll

FILE PHOTO: A truck drives between shipping containers at a container terminal at Incheon port in Incheon, South Korea, May 26, 2016.REUTERS/Kim Hong-Ji TPX IMAGES OF THE DAY/File Photo

BENGALURU : South Korea's economic growth likely slowed a bit in the third quarter as robust exports were partially offset by subdued domestic demand due to the spread of the Delta coronavirus variant, a Reuters poll found.

Asia's fourth-largest economy is expected to have expanded by a seasonally-adjusted 0.6per cent in the third quarter from the previous three-month period, according to the median forecast of 12 economists, after growing 0.8per cent in April-June.

On a year-on-year basis, gross domestic product (GDP) likely expanded 4.2per cent, down sharply from the second quarter's 6.0per cent pace, which was the fastest in a decade. The data will be released on Oct. 26.

"Domestic exports and facility investment continued to support growth, while private consumption has been somewhat sluggish in the third quarter due to the re-spread of COVID-19 in Korea," said Chun Kyu-yeon, an economist at Hana Financial Investment in Seoul.

"Although a recovery from global supply disruptions is being delayed and risks related to the Chinese economy persist, consumption is expected to improve thanks to government policy support and the transition to the phase where we live with coronavirus."

Still, the South Korean economy is expected to lose momentum next year amid waning pandemic-related stimulus and the economic slowdown in China, the country's largest trade and investment partner.

"It is quite worrying what is happening in China and it is clearly a big downside risk. The preliminary risk is limited for now but we have to wait and see," said Stephen Lee, chief economist at Meritz Securities in Seoul.

Growth is forecast to average 4.0per cent this year, a sharp rebound after the economy shrank 1.0per cent last year, its first contraction in over two decades, according to a separate Reuters poll published earlier this month. But growth was expected to ease to 3.0per cent next year and then to 2.6per cent in 2023.

South Korean exports grew strongly in October, soaring 36.1per cent from a year earlier. Exports to China, the United States and European Union rose 30.9per cent, 37.1per cent and 42.1per cent, respectively, during the period.

Those trade figures will be closely watched by the Bank of Korea ahead of a widely-expected interest rate hike to 1.0per cent at its next meeting on Nov. 25.

"The strength of the external sector adds weight to our view that the economy will expand faster, and the central bank will tighten more quickly," said Alex Holmes, Asia economist at Capital Economics in Singapore.

(Reporting by Vivek Mishra in BENGALURU and Jihoon Lee in SEOUL; Polling by Devayani Sathyan and Md. Manzer Hussain; Editing by Ross Finley and Kim Coghill)

Source: Reuters


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