Korea’s economic recovery to be slower than Japan on weak exports

[Photo by MK DB]

South Korea’s economic growth is expected to be overtaken by Japan for the first time in 25 years as exports aren’t showing any signs of recovery, while Japan’s gross domestic product expanded for the first time in three quarters on rising consumption.

The Japanese Cabinet Office released Wednesday a preliminary GDP report for the first quarter, saying that real GDP increased 0.4 percent from the previous quarter. The country’s economy could grow 1.6 percent this year should this trend continue.

The positive growth was driven by a 0.6 percent increase in private spending that accounts for more than half of Japan’s GDP. Consumption of durable goods, including automobiles, also increased as the semiconductor supply shortage eased. Facility investment, in particular, edged up 0.9 percent, showing positive growth in two quarters. The Nikkei index continued its upward trend for five consecutive trading days and closed 0.8 percent higher at 30,93.59, rising above 30,000 mark for the first time since September 2021.

The outlook for the Korean economic growth, in contrast, is not as rosy as the slump continues on a sharp decline in chip exports and a delay in the boost from China’s reopening of borders. Unlike Japan, facility investment continues to shrink in Korea.

Global investment bank BNP Paribas SA predicts that the Bank of Korea will lower the nation’s economic growth forecast for this year by 0.1 to 0.2 percentage points to 1.4 percent to 1.5 percent next week.

The Korea Development Institute, a state-run think tank, revised down this year’s economic growth estimate to 1.5 percent from 1.8 percent a week earlier and the International Monetary Fund also lowered its forecast to 1.5 percent from 2.1 percent four times between July and last month.