January 20, 2020 / 6:46 AM / a month ago

South Korea's fourth-quarter GDP growth seen picking up, but full-year pace slowest in a decade: Reuters poll

SEOUL (Reuters) - South Korea’s economy likely grew faster in the December quarter than in the preceding period, helped by improved domestic consumption after fiscal and monetary stimulus, a Reuters poll showed on Monday.

FILE PHOTO: People look at a view of central Seoul from an observatory platform in Seoul, South Korea, August 30, 2016. REUTERS/Kim Hong-Ji

Gross domestic product for the October-December period is expected to have expanded a seasonally adjusted 0.8% from the previous quarter, when it grew 0.4%, the median forecast from the survey of 14 economists showed.

“The high-frequency indicators including retail and property sales, consumer confidence and services output showed notable improvement in the fourth quarter, helped by the government’s and the central bank’s fiscal and monetary stimulus measures,” said Ma Tieying, economist at DBS.

With South Korea’s economy hit by a China slowdown and soft computer chip demand last year, the government responded with an extra $5 billion stimulus plan while the Bank of Korea (BOK) trimmed its policy interest rate twice in July and October.

From a year earlier, the economy, however, expanded 1.9% in the Christmas quarter, according to the same survey, slowing from 2.0% growth seen three months earlier. Twenty four economists provided year-on-year growth estimates for the final quarter of the year.

“While facility and construction investments and goods exports likely continued to decline on-year, unstable global trade conditions and local property regulations may have also dented exports and investment growth,” said Ahn So-eun, economist at IBK Securities.

ECONOMY BOTTOMING OUT

For the whole of 2019, 40 analysts predicted Asia’s fourth-largest economy would grow a median 1.9%, much slower than 2.7% growth in 2018.

Forecast for 2019 growth would be a notch below the central bank’s 2.0% projection made in November last year, and the worst since the global financial crisis of 2009 when growth was 0.8%.

But with recent economic data showing signs of stabilization, analysts say the economy may be bottoming out.

“The big picture is that the economy is gradually gaining a firmer footing, and a modest recovery in the export sector and expansionary fiscal policy should help support economic activity in the coming quarters,” said Krystal Tan, economist at ANZ Research.

South Korean exports shrank for the 13th month in a row but December saw the smallest decline since April, raising hopes that global trade may be turning a corner.

In December, the nation’s parliament approved a sharply higher 512.3 trillion won ($442.55 billion) government budget for this year.

Last week, South Korea’s central bank kept its benchmark rate steady at 1.25%, as widely expected, citing signs of an improving trade environment and a resilient domestic backdrop that suggested policymakers are in no rush to lower borrowing costs again.

The central bank sees this year’s growth gradually rising to 2.3%.

The BOK will release advance estimates of gross domestic product for the fourth quarter and whole of 2019 at 8:00 a.m. on Wednesday (2300 GMT Tuesday).

Editing by Jacqueline Wong

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