Korea tops forecasts with 1.1pc growth
Reuters in Seoul
South Korea's economy grew 1.1 per cent in the third quarter from the previous three months, led by private consumption and construction investment, the central bank estimated yesterday, just ahead of the market's consensus forecast.
The seasonally adjusted reading compared with a median 1 per cent rise tipped in a survey of 16 analysts and matched a 1.1 per cent gain set in the April-June quarter, when Asia's fourth-largest economy grew the most in more than two years.
The quarterly growth was the strongest since a 1.3 per cent expansion in the first quarter of 2011.
Private consumption rose a seasonally adjusted 1.1 per cent on a quarterly basis, government spending edged up 0.1 per cent and capital investment gained 1.2 per cent, the Bank of Korea's official estimates showed.
From a year earlier, gross domestic product expanded 3.3 per cent in the quarter, compared with the median 3.2 per cent growth tipped in the poll and the 2.3 per cent annual gain in the second quarter.
It was the quickest annual growth since the 3.4 per cent gain in the fourth quarter of 2011.
"It's clear that the economy is now on a recovery path, and I expect the sequential GDP growth rate to remain around 1 per cent going forward," said Lee Chul-hee, the chief economist at Tong Yang Securities.
Despite yesterday's positive numbers, prospects for this quarter look cloudy as poor tax revenue on a slower-than-expected recovery is likely to result in smaller government spending for the rest of the year while global demand remains depressed.
The government said this year's tax revenue was likely to miss the target by up to 8 trillion won (HK$58.5 billion), about 0.7 per cent of annual GDP, putting President Park Geun-hye's administration under pressure as it aims to achieve a balanced budget in her five-year term to 2018.
But the fiscal drag is likely to be short-lived. The central bank has predicted a pickup in growth to 3.8 per cent next year from a projected 2.8 per cent rise this year.
The government is also dealing with a rise in the won towards levels last seen before the 2008 global financial crisis, as the positive growth outlook and the country's strong external standings have spurred fund inflows.
Park has promised to shift a long-standing policy stance skewed towards supporting mostly big export firms, which many analysts said suggested her government might no longer resist the won's appreciation.