SEOUL: A massive recall of Samsung smartphones and strikes at Hyundai Motor took a toll on South Korea’s economy in the third quarter, with the slowest growth in more than a year. Asia’s fourth-largest economy expanded 2.7 per cent on-year in July-September – the weakest pace since the second quarter of 2015 – the central Bank of Korea (BOK) said Tuesday. “Growth in manufacturing slowed considerably as halted production of Samsung’s Galaxy Note 7 and strikes at Hyundai Motor hit overall production, consumption and exports of the auto and smartphone industries,” said Chung Kyu-il, a director at the BOK.
“Losses linked with the Note 7… may have further impact on the fourth-quarter growth as well,” he said. The BOK estimates this year’s growth outlook at 2.7 per cent. Samsung – the world’s top smartphone maker and the South’s biggest firm by value accounting for about 17 per cent of GDP – announced the recall of 2.5 million Note 7s after reports of the devices catching fire.
When replacement phones also started burning up, the company opted to tale a multi-billion-dollar profit hit and scrap the high-end smartphone altogether. Tens of thousands of workers at Hyundai – the South’s top automaker – staged full or partial strikes for several weeks through July to October demanding higher wages. The firm estimated the loss caused by the actions at more than 3 trillion won (US$2.6 billion).
South Korea has been struggling to keep its economy afloat as it is buffeted by the global economic slowdown, with the central bank keeping its key interest rate at a record low in a bid to spur domestic spending. The BOK earlier this month cut the country’s growth outlook for 2017 to 2.8 per cent from 2.9 per cent, having considered the potential impact of the Samsung’s recall crisis. The South’s economy expanded 2.6 per cent last year – the lowest since 2012.
