Three Percent Low Growth in the First Half

The economic growth rate of the second quarter (April to June) this year is temporarily estimated at 3.3 percent.

The rate in the first half of this year, including 2.7 percent of the first quarter (January to March), was a mere 3.0 percent and failed to recover from the prolonged “streak of low growth” since 2001.

According to the Bank of Korea (BOK)’s “2Q Real GDP Interim Report” released on July 26, the economic growth rate in the second quarter stood at 3.3 percent year-on-year, a slight rise from that of the first quarter.

The quarterly growth rate with seasonal factors removed recorded 1.2 percent, the highest since the fourth quarter of 2003 (2.8 percent).

Han Duck-soo, deputy prime minister and minister of Finance and Economy, said, “Adjusted for seasonal factors, the annualized growth rate for the quarterly 1.2 percent amounts to a potential growth rate of 4.8 percent. This upward trend is expected to continue into the second half.”

By sectors, the private consumption and construction investment showed signs of picking up while the export increase that had been leading the overall growth slowed down.

Private consumption rose for three consecutive quarters since the fourth quarter (October to December) last year. The rise in the second quarter posted 2.7 percent, higher than the 0.6 percent of the fourth quarter last year, and 1.4 percent of the first quarter this year. The construction investment also recovered from the negative territory which lasted for two quarters in a row and made a turnaround to 1.8 percent.

However, there seems to be a considerable amount of “bubble” since the private consumption announced by BOK that day involves overseas consumption.

Facility investment remained stagnant, up only 3.1 percent this first quarter and 2.8 percent in the second quarter. The export of goods also fell short of 6.1 percent year-on-year in the second quarter, with the growth rate remaining at a single digit for two consecutive quarters. As a result, its contribution to the export growth fell significantly from 145.4 percent in the first quarter to 81.5 percent in the second quarter.

Analysts noted that the economic growth rate could have fallen below three percent had the government not increased its expenditures in the first half.

Kyung-Joon Chung news91@donga.com