Korea’s 3Q Growth Rate Just 0.09 percent

Growth in 3Q recorded a mere 0.9 percent year on year. Economic growth compared to last year was a mere 4.6 percent, raising speculation of a full-fledged economic downturn.

According to a report on GDP in the third quarter by Bank of Korea (BOK), GDP in the 3Q was 190.15 trillion won, a 0.9 percent increase from 188.44 trillion won in the 2Q. This rate marks two consecutive months of low growth rate under 1 percent from 2Q’s 0.8 percent.

Last year’s GDP growth rate compared to the previous quarter was 1.4 percent in 2Q, 1.6 percent in 3Q, and 1.6 percent in 4Q. This year, it fell to 1.2 percent in the 1Q, and below 1 percent from the 2Q. The GDP growth rate compared to the same period last year was a mere 4.6 percent, the lowest since 4.5 percent in 3Q of last year. GDP grew 5.3 percent year on year in the 2Q.

The BOK explained that the GDP grew by less than 1 percent because of sluggish private consumption and service sector, and external factors such as skyrocketing oil prices and fluctuating exchange rate.

In fact, the private consumption growth rate stood at a mere 0.5 percent in the 3Q, the lowest since 0.5 percent in the 1Q of last year. The service sector also grew by only 0.5 percent, the lowest since 0.4 percent in the fourth quarter of 2004, as growth of retail, wholesale, restaurant and hotel businesses halted.

However, construction investment grew by 2.3 percent, increasing from minus 3.9 percent in the 2Q, and capital investment also increased by 3.1 percent.

With negative external factors, real trade losses recorded 18.79 trillion won, the highest on a quarterly basis.

“If the trend continues, I think whether we achieve the goal of five-percent growth this year does not make a big different. The growth rate may be over five percent or lower than it,” said an official of BOK, signaling the projected growth rate could be unachievable.

“We need to proactively increase growth potential, as there are many uncertainties in the Korean economy such as the North Korean nuclear issue next year,” pointed out people from the business, academic sector and private economic research institutes in a meeting hosted by Governor of BOK.

“The biggest challenge to our economy is increasing our growth potential, which is falling in the last few years. The government should drastically reduce regulations in private investment, and the businesses should strive to create profit models,” they emphasized.

jinhup@donga.com