Korea’s Q2 economy grows 0.6% on-quarter on weak imports

[Photo by Yonhap]

South Korea’s economy grew by an anemic 0.6 percent in the second quarter of this year as imports fell more than exports and net exports rose from the previous quarter, central bank data showed Tuesday.

According to an advance estimate from the Bank of Korea (BOK), the country’s real gross domestic product (GDP), a key measure of economic growth, rose 0.6 percent on-quarter in the April-June period.

Asia’s fourth-largest economy has been on a recovery pace since it contracted 0.3 percent in the fourth quarter last year amid a sharp drop in exports, but it managed to rebound 0.3 percent in the first quarter of this year due to private consumption, avoiding consecutive quarters of negative growth.

Breaking down the growth rate by sector, private consumption fell by 0.1 percent in the second quarter, led by a decline in services such as food and lodging. Government consumption also fell by 1.9 percent mainly in social security in-kind benefits such as health insurance benefits.

Construction investment and equipment investment also declined by 0.3 percent and 0.2 percent, respectively, due to weak civil engineering and transportation equipment sectors.

Despite decreases in both private and government consumption and investment, the overall GDP managed to grow by 0.6 percent due to positive net exports which are the difference between the monetary value of a nation’s exports and imports over a certain time period.

Real GDP is the sum of private consumption, government consumption, investment, and net exports, and compared to the first quarter, imports declined more than exports, allowing for positive growth due to an increase in net exports, according to the BOK.

In the second quarter, exports shrank by 1.8 percent despite growth in sectors such as semiconductors and automobiles, as petroleum products and transportation services declined. Imports, on the other hand, fell by 4.2 percent, mainly in crude oil and natural gas.

Accordingly, only net exports were positive when analyzing the contribution of each item to the growth rate in the second quarter. This means that net exports alone boosted the second-quarter growth by 1.3 percentage points. In contrast, private consumption, government consumption, and construction investment dragged growth down by 0.1 percentage points, 0.4 percentage points, and 0.1 percentage points, respectively.

By industry, agriculture, forestry, and fisheries grew 5.5 percent, led by cultivation, and manufacturing grew 2.8 percent, led by computer, electronic, and optical equipment. The service industry also grew by 0.2 percent, led by transportation.

However, electricity, gas, and water utilities and construction declined by 6 percent and 3.4 percent, respectively.

The real gross domestic income (GDI) for the second quarter remained at the same level as the first quarter, with no increase despite the 0.6 percent increase in real GDP due to worsened trade conditions.