GDP growth rate slows in third quarter though 2021 4% still eyed

Growth slowed in the third quarter despite robust exports, as weak private consumption and weak construction and facilities investment held the economy back.

Bank of Korea's headquarters in central Seoul [YONHAP]

Growth slowed in the third quarter despite robust exports, as weak private consumption and weak construction and facilities investment held the economy back.

The gross domestic product (GDP) increased 0.3 percent on quarter despite a 4.0 percent on-year rise, according to the Bank of Korea Tuesday.

The on-quarter number is lower than the expected 0.46 percent and lower than the 0.8 percent growth on-quarter posted in the second quarter. It is the lowest since the minus 3.2 percent reading in the second quarter of 2020.

“We had expected around 0.46 percent growth," said Hwang Sang-pil, director general of the central bank's economic statistics department. "But we don't think 0.3 percent growth is necessarily a worrying figure."

Exports rose 1.5 percent on-quarter, with exports of services jumping 4.5 percent on-quarter. Imports fell 0.6 percent.

Strong export figures were offset by weak private consumption, which fell 0.3 percent on-quarter, from 3.6 percent growth in the previous quarter. Construction investment dropped by 3 percent and facilities investment by 2.3 percent.

Hwang Sang-pil, director general of economic statitsics deparment at the Bank of Korea, speaks during an online press briefing held Tuesday. [BANK OF KOREA]

The central bank said the resurgence of the pandemic in the third quarter pulled down consumer sentiment, while global supply bottlenecks, which caused shortages of auto semiconductors and construction equipment, affected construction and facilities investment.

The Bank of Korea official said that the bank expects the country will still be able to achieve the earlier projected 4 percent growth target.

In September, director of the national accounts division Shin Seung-cheol said in the "following quarters we need only to grow at around 0.6 percent compared to previous quarters" to achieve 4 percent annual growth.

"We can still achieve 4 percent annual growth if the country's economy expands by more than 1.04 percent on-quarter in the fourth quarter," Hwang said.

"Global supply shortages, uncertainties from the Chinese economy and soaring energy prices remain risks to our economy, however there are also positive drivers, such as the government's second supplementary budget and expanded vaccinations," Hwang said, adding relaxed social distancing measures from November along with the government's plan to cut fuel taxes announced Tuesday will also boost consumer sentiment in the fourth quarter.

Under the government's "With Corona" strategy, curfews covering restaurants, pubs and cafes will be lifted from November. The government on Tuesday announced its plan to cut the fuel tax by 20 percent from Nov. 12 for six months to balance soaring fuel prices.

The country's gross domestic income in the third quarter grew 2.4 percent on year and 0.3 percent on quarter, according to the central bank.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]