The South Korean economy is forecasted to have grown by 0.6% in the last quarter, maintaining the same rate of expansion as in the previous three months. This growth was driven by an uptick in export performance, particularly in the semiconductor sector, indicating global trade health. Despite strong exports, household consumption weakened, with retail sales data showing continued weakness in consumer spending.
Looking ahead, economists predict that consumer demand will remain a weak point for the economy, as elevated interest rates and a cooling labor market weigh on demand. On the other hand, the manufacturing sector and exports are expected to remain strong, supported by global demand for semiconductors. This is likely to offset any struggles in global growth in the near term.
On a year-on-year basis, GDP is forecasted to have expanded by 2.4% in the last quarter, faster than the previous quarter. This would mark the fastest growth rate since Q3 2022. However, concerns about uneven growth in China, South Korea’s biggest trading partner, could impact the ongoing recovery. Additionally, the country’s high levels of debt and interest rate hikes by the Bank of Korea have restrained spending, further impacting consumption.
The central bank has indicated that it will only consider lowering borrowing costs once inflation moves closer to its target of 2%. In March, inflation was at 3.1%, adding to