Korea: Has Real GDP Growth Bottomed Out?

Posted July 27, 2011 by Editor

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• Preliminary data show that Korea’s GDP grew 0.8% quarter-on-quarter in seasonally-adjusted terms.  The number marks a deceleration from the first quarter (+1.3%), also reflected in a decline of the annual rate of expansion from 4.2% year-on-year in the first three months of 2011 to 3.4% year-on-year in the April-to-June period.  Still the data detail contains some encouraging signs that the weakening of domestic-demand growth evident in the past few quarters might have come to an end.

• From policymakers’ perspective, however, the temptation to celebrate growth-success—and to unleash their anti-inflation energies more freely—could be premature. Real GDP growth somewhat below the historical trend-rate (we estimate a best-case scenario of 4.1% real GDP growth for the year, with potential for an average pace as low as 3.5%); Korea is also exposed to a potentially very significant adverse shock through its important export sector, should global conditions deteriorate further.

7-27-11–EMG INDICATORS AND INSIGHTS _Korea GDP_[/private]