South Korea’s economy is likely to recover in the third quarter after contracting slightly in the second quarter, with increased exports offsetting the impact of high borrowing costs on domestic demand. The country’s gross domestic product (GDP) grew by a seasonally adjusted 0.5% in the July-September period, according to a survey by economists.
The expansion marks a recovery from the unexpected 0.2% contraction recorded in the April-June quarter. On a year-on-year basis, the country’s GDP is estimated to have grown 2.0% in the third quarter, slowing from 2.3% in the previous quarter, according to the median forecast of 26 economists surveyed from Oct. 15 to Oct. 21. There is. .
South Korea’s monthly exports increased by an average of nearly 10% until September this year, mainly due to demand for semiconductors from the United States. This strong export performance has helped the foreign trade-dependent economy avoid what is generally defined as a technical recession, or two consecutive quarters of contraction.
However, export growth has slowed in recent months due to a decline in trade with South Korea’s largest trading partners, China, Japan and India. The country also suffers from high borrowing costs that are hurting domestic consumption, with household debt among the highest in the developed world.
In an effort to stimulate demand, the Bank of Korea (BOK) lowered its base interest rate by 25 basis points from a 15-year high of 3.50% earlier this month.
Despite these moves, the Bank of Korea is expected to maintain its current stance for the remainder of the year, with a further 50 basis points rate cut expected in 2023. This is in contrast to expectations for the US Federal Reserve, which is expected to lower interest rates by 2023. 150 basis points by the end of 2025.
South Korea’s economic growth is expected to average 2.4% this year, in line with the central bank’s recently lowered forecasts, due to an uneven recovery in China and weaker demand in the United States.
Reuters contributed to this article.
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