Korean economy grows 0.3 percent in first quarter, exports lag

Korea’s economy grew 0.3 percent in the first quarter on year, slightly above forecasts.

A customer shops at a discount mart in Seoul on April 20. [YONHAP]

Korea’s economy grew 0.3 percent in the first quarter on year, slightly above forecasts.

Private spending led growth, centered on entertainment, accommodation and food services. Exports dwindled while imports jumped on the buying of chemical products, according to the advance gross domestic product (GDP) estimate released by the Bank of Korea Tuesday.

Economists usually define a recession as two consecutive quarters of contraction.

“Growth in the first quarter was more favorable than expected, despite negative factors, including sluggish IT and a delayed reopening of China,” said Shin Seung-chul, director general of the Bank of Korea’s economic statistics division.

“The gradual growth was attributed to the growth of non-IT businesses and private spending. Negative situations are projected to persist for some time, but it is expected to improve nearing the second half of the year.”

The economy grew 0.8 percent on year.

Private spending jumped 4.5 percent on year, and government spending increased 3.9 percent. Exports fell 3.0 percent while imports jumped 4.4 percent in the same period.

“Normalization of outdoor activities and a rise in overseas travel will positively affect private spending, but exports through April 20 were still negative by a large gap,” Shin said.

Korea’s exports fell 11 percent on year in the first 20 days of April, according data from the Korea Customs Service. Exports of semiconductors dropped 39.3 percent.

Exports were led by automobiles and transportation equipment, while imports grew on chemical product purchases.

Shin added that the impact of property deregulation on construction investment and the impact of the government’s early execution of spending will be keys that determine growth.

The Bank of Korea’s annual projection for Korea’s growth this year is 1.6 percent. But central bank Gov. Rhee Chang-yong said earlier this month the outlook could be revised.

The International Monetary Fund (IMF) slashed Korea’s growth forecast for this year to 1.5 percent from the previous 1.7 percent earlier this month, the fourth consecutive cut.

Weak chip demand and the global economy are major factors.

Samsung Electronics reported a 96 percent drop in operating profit in a first quarter projection, and the world’s biggest memory chip maker is cutting back on chip production.

China’s reopening of the economy also isn’t helping much.

“China’s reopening following its protracted lockdown was projected to contribute to the global economic recovery, but the effect in Korea and other surrounding countries has yet to materialize,” according to a Bank of Korea report on April 17.

China’s recovery, centered on service spending, has had a limited impact on Korea’s economy.

“Korea’s exports and manufacturing are nearing lows,” wrote Chung Sung-tai, senior economist at Samsung Securities, in a report Tuesday. “But the continued tone of monetary tightening by central banks in key countries and the normalizing spending on products and service are projected to keep the recovery gradual.”

Korea’s Gross Domestic Income (GDI) fell 1.8 percent on year, easing from minus 2 percent in the previous quarter. On quarter, the GDI grew 0.8 percent.

BY JIN MIN-JI [jin.minji@joongang.co.kr]