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South Korea’s economic system contracted within the final quarter — the primary time it has shrunk for the reason that onset of the coronavirus pandemic — as exports have been hit by the worldwide financial slowdown.

Gross home product shrank 0.4 per cent within the October-December interval from the earlier quarter, the Financial institution of Korea stated on Thursday, which was according to analyst estimates. The economic system nonetheless grew 1.4 per cent from a yr earlier.

Exports slid 5.8 per cent and personal consumption declined 0.4 per cent quarter on quarter whereas authorities spending elevated 3.2 per cent. Nonetheless, the economic system expanded 2.6 per cent in 2022 from a yr earlier.

Finance minister Choo Kyung-ho performed down the weak information as a part of a worldwide development and pledged to offer monetary assist to exporters, together with tax advantages.

“The federal government will focus coverage sources on reactivating exports and funding, resembling pushing forward with deregulation efforts and providing tax and monetary assist,” Choo informed a gathering with authorities officers.

Hyundai vehicles wait to be loaded on to a container ship at Ulsan.
Hyundai autos wait to be loaded on to a vessel on the port of Ulsan. Financial institution of America economists stated a ‘a fast reversal of exports is unlikely’ © SeongJoon Cho/Bloomberg

The info from the export-driven economic system offers an early glimpse into the state of the world economic system with international demand for Korean exports resembling semiconductors, metal and ships slowing within the face of upper rates of interest and inflation.

Economists anticipate the BoK’s quarter-point rise in its coverage price to three.5 per cent earlier this month to mark the top of its 17-month tightening cycle and to contemplate beginning a price lower later this yr.

“We keep our below-consensus 2023 progress forecast at 1.3 per cent. This could maintain the [central bank] on monitor for a 25 [basis point] lower in [the fourth quarter] of 2023,” Bum Ki-son, economist at Barclays, stated in a be aware on Thursday.

However economists additionally anticipate Asia’s fourth-largest economic system to rebound within the present quarter, helped by China’s reopening from Covid-19 restrictions.

“Whereas we see a tailwind, a fast reversal of exports is unlikely,” stated Financial institution of America economists in a be aware earlier than the information have been launched. “What Korea wants finally is China’s closing exterior demand pick-up to strongly profit Korea’s middleman good exports.”

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