Reuters survey of economists revealed that the South Korean economy has experienced minimal growth in the last quarter, which was hindered by political turmoil that dampened consumer spending. Many expected that the Bank of Korea would lower interest rates next month after unexpectedly maintaining them last week.
South Korea is the fourth-largest economy in Asia, however, it faced challenges because of President Yoon Suk Yeol’s brief attempt at martial law on December 3. It had a negative impact on the economic sentiment and stifled domestic demand overshadowing a rebound in exports.
According to the median forecast from 24 economists, following a mere 0.1% growth in the July-September period, the economy is projected to have expanded by a seasonally adjusted 0.2% in the fourth quarter.
The economy grew by 1.4% last quarter on a year-over-year basis, this figure is based on the median predictions of 25 economists surveyed between January 15 and 20. It showed a little change from 1.5% in the previous quarter.
An economist at ANZ, Krystal Tan stated, “We anticipate that the Q4 GDP figures will reflect tepid growth. Indicators suggest a decline in domestic demand, especially in December, as political developments have undermined consumer and business confidence.”
The exports increased by 6.6% compared to the same month the previous year, with semiconductor exports growing by 31.5%. The Bank of Korea (BOK) unexpectedly decided to keep its key interest rate unchanged on January 16 to stabilize the Korean Won. It has depreciated over 12% last year because of the political instability that affected investor confidence. Since that decision, the currency has been showing a little bit of improvement.
A senior economist at ING, Min Joo Kang remarked, “Provided the political climate does not deteriorate further and any fluctuations in the USD/KRW are primarily influenced by global dollar strength, the BOK is likely to implement a rate cut in February.”
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