According to Bank of Korea data, the country’s GDP increased 0.3% from July to September, marking the slowest quarterly growth in a year. In the previous quarter, it increased by 0.7%.
South Korea’s third-quarter GDP report showed that growth was driven primarily by consumer spending and facility investment, which increased 1.9% and 5%, respectively.
Even as the global economy enters a slump, South Korea’s economy saw a small increase, which one analyst attributed to “revenge spending” as the country reopened.
According to Bank of Korea data, GDP increased 0.3% from July to September, the slowest quarterly growth in a year. In the previous quarter, it increased by 0.7%.
I think the domestic momentum is fairly resilient,” Kathleen Oh, Bank of America’s Korea economist, said on CNBC’s Squawk Box Asia.
With the reopening and pent-up demand in services, we’re actually seeing quite strong’revenge spending’ in leisure, entertainment, and travel,” she said, adding that domestic demand is likely to support continued growth through the rest of the year.
South Korea’s third-quarter GDP report showed that growth was driven primarily by consumer spending and facility investment, which increased 1.9% and 5%, respectively.
According to the Korea Culture and Tourism Institute, total tourism and leisure spending in Korea from January to October was approximately 67 trillion won ($47.2 billion). While it was more than 5% lower than the same period in 2019, prior to the pandemic, it was still up more than 21% from the previous year.
Spending fell by more than 28% in 2020 compared to the same period in 2019 and is expected to remain stable in 2021.
Goldman Sachs analysts said in a note on Thursday that private consumption “maintained an overall robust pace of increase,” adding that it was stronger than expected and driven by spending on automobiles and services.
According to ING economists, “reopening-boosted pent-up consumer spending slowed, while investment demonstrated a more resilient recovery.
Recessionary pressure in 2023
According to ING economists, South Korea will enter a recession in 2023.
Based on recent data showing a bleak outlook for consumption and exports, we maintain our view that the economy will enter a moderate recession early next year,” they wrote in a note.
Bank of America’s Oh also expressed concern about the economy’s outlook for next year.
It’s the external demand or the external environment that’s been putting pressure on the production or manufacturing side overall,” she explained.
Goldman Sachs economists recently reduced their forecast for South Korean growth in 2023 from 1.7% to 1.4%.
The main reasons for our more bearish growth views are current and prospective external demand weakness, the economists wrote in a note.
They indicated the possibility of spillovers from a slowing global economy to domestic demand, as well as local headwinds such as monetary tightening and, in the case of South Korea, fiscal consolidation.
