South Korea’s GDP Growth Set To Remain Strong On Robust Global Demand

South Korea’s economic growth is likely to remain strong over the coming year on the back of robust global demand, Gareth Leather and Shilan Shah, economists at Capital Economics, said.

GDP growth rebounded to 1.4 percent in the third quarter from 0.6 percent in the second quarter, official data showed on October 26.

Moreover, this was the fastest quarterly growth since the second quarter of 2010.

South Korea’s growth reached a 7-year high in the third quarter, as the economy brushed off the rising tensions on the Korean peninsula, economists observed.

“Provided conflict is avoided, South Korea should continue to grow strongly over the coming year, helped by robust global demand, an increase in government spending and a big rise in the minimum wage,” they said.

The rebound in the third quarter was largely driven by a jump in export demand, which grew by 6.6 percent compared with a contraction of 2.9 percent in the second quarter.

On an annual basis, the economic growth accelerated to 3.6 percent from 2.7 percent.

“Looking ahead, prospects for next year are good,” Capital Economics said.

With inflationary pressures low, monetary policy is likely to remain loose, economists said. They expect the policy rate to remain unchanged at 1.25 percent throughout 2018.

Besides this, fiscal policy is likely to remain supportive and the government plans to boost spending next year by 4.6 percent, Capital Economics said.

Furthermore, export demand is expected to be a key driver in the future.

Capital Economics expects the global economy to grow by a healthy 3.4 percent next year, which on past form is consistent with South Korean exports doing well in the coming quarters.

“Overall, we are nudging up our growth forecast for this year to 3.0 percent, from 2.5 percent previously,” economists said.

“We are keeping our forecast for next year unchanged at 3.0 percent.”
Source: RTT News