South Korea’s economy could come to a grinding halt in Q3

© Stocksak. FILE PHOTO – A promoter of a foot spa is seen in Seoul’s Myeongdong shopping area, South Korea, April 26, 2017. REUTERS/Kim Hong-Ji/File Photo

By Devayani Sathyan

BENGALURU, Stocksak – South Korea’s economy likely stopped in the third quarter because of weakening imports and rising interest rate. This was a result of a resilient run, according a Stocksak poll.

According to 21 economists’ median forecasts, the export-led economy was expected grow by 0.1% last quarter. This is a sharp decline from the 0.7% quarterly growth between April and June.

Three economists predicted a complete contraction, while two others expected the economy to stagnate.

According to the median forecast of 22 economists polled Oct. 20,-24, GDP is expected to grow 2.8% annually, which is down from 2.9% in Q2.

The data will be released on October 27th.

“GDP growth was likely to have been slower than 2Q22 due to the slowdown of consumption. The weakening of exports and manufacturing production is likely have continued amid the worsening global economic outlook,” stated Oh Suktae economist at Societe Generale.

“GDP growth should be slow, at least in near term,” said the economist. Consumption growth should normalize after the post-pandemic recovery, and the export and investment environment likely to remain weak.

The fourth-largest Asia economy, exports, grew at the slowest rate in almost two years in September. This is despite growing fears of global recession as well as a slowdown in China.

This, along with aggressive interest rate increases by the Bank of Korea (BOK), to reduce decade-high inflationary pressures will impact the economy. The benchmark interest rate was increased by 50 basis point to 3.00% by the BOK in October.

In this cycle, the central banks have increased rates by cumulative 250 basis points.

“Looking ahead,” Bansi Madhavani (an economist at ANZ), stated that weakening export prospects, high domestic inflation, rising debt servicing costs, and tightening policies all point to intensifying the growth headwinds.

According to a separate Stocksak poll growth is expected to average 2.6% this and ease to 1.9% next years.

News Source and Credit

Stocksak Editorial

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