SEOUL: South Korea’s gross domestic product expanded 0.4 per cent quarter-on-quarter in the first three months of the year after growth of 0.7 per cent in the fourth quarter of 2015. The economy grew 2.7 per cent from a year earlier, according to the data from the Bank of Korea.
Exports of goods and services, which account for about half of South Korea’s GDP, fell 1.7 per cent from the previous quarter hit by weaker global demand, particularly from China. South Korea’s exports have fallen for 15 months in a row. Imports dropped by 3.5 per cent quarter-on-quarter. The fall in exports had a negative impact on corporate investment. Facility investment dropped 5.9 per cent from the previous quarter.
Private consumption decreased 0.3 per cent quarter-on-quarter, despite the reintroduction of consumption tax breaks on cars. Private spending is mostly held back by the high level of household debt, which rose to a record 1 trillion dollars at the end of last year.
On April 19th, the Bank of Korea lowered its 2016 economic growth forecast to 2.8 per cent from a previous estimate of 3 per cent. It also trimmed its inflation outlook to 1.2 per cent from 1.4 per cent and kept interest rates on hold, at a record low of 1.5 per cent. The headline consumer price index was up by 1 per cent in the year to the end of April. Stripping out volatile energy and food prices, CPI rose 1.8 per cent year-on-year.
