Q3 GDP 0.3%... Economic Uncertainty for Next Year Increases Due to 'Omicron' (Comprehensive)

Q1 1.7% → Q2 0.8% → Q3 0.3% 'Growth Momentum Slows'
Omicron Variant Virus May Impact Exports and Consumption

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The real gross domestic product (GDP) growth rate for the third quarter (July to September) of this year was 0.3%, the same as the preliminary figure (0.3%) released last October. While exports showed strong performance and corporate earnings were favorable, global bottlenecks and high inflation hindered growth. Concerns are rising that the detection of Omicron variant cases domestically may affect future exports and consumption.

On the 2nd, the Bank of Korea announced that the real GDP growth rate for the third quarter of this year (provisional, quarter-on-quarter) was 0.3%, the same as the preliminary figure released on October 26.

Looking at this year's trend, growth has been slowing down from 1.7% in the first quarter, 0.8% in the second quarter, to 0.3% in the third quarter. Uncertainty remains high for the remaining fourth quarter. To achieve an annual growth rate of 4.0%, growth must exceed 1.04% in the fourth quarter.

By expenditure category, private consumption recorded -0.2%, revised upward by 0.1 percentage points from the preliminary figure, as services (such as food and accommodation) decreased but non-durables (such as food products) increased.

Facility investment fell by 0.1 percentage points from the preliminary figure to -2.4%, affected by a decline in transportation equipment. Construction investment decreased by 3.0%, mainly in civil engineering construction, revised downward by 0.5 percentage points from the preliminary figure. Exports increased by 1.8%, driven by coal and petroleum products, machinery, and equipment, while imports decreased by 0.7 percentage points due to a decline in automobiles.

The contributions to the third quarter growth rate from private consumption, construction investment, and facility investment were -0.1 percentage points, -0.5 percentage points, and -0.2 percentage points, respectively, indicating that consumption and investment pulled down the growth rate in the third quarter.

Conversely, net exports and government spending raised the growth rate by 0.9 percentage points and 0.2 percentage points, respectively.

By industry, agriculture, forestry, and fisheries grew by 8.9%, manufacturing recorded 0.0%, while services and construction recorded 0.5% and -2.4%, respectively.

Nominal gross national income (GNI) increased by 0.1% compared to the previous quarter.

Real gross national income (GNI) decreased by 0.7%. Although the real trade loss (10.9 trillion won) was similar to that of the second quarter, the real net primary income from abroad sharply declined from 8.8 trillion won to 4 trillion won, causing the real GNI growth rate to fall significantly below the real GDP growth rate (0.3%).

The nominal GDP growth rate, reflecting price changes, recorded 1.4%, down from 1.9% in the second quarter.

Meanwhile, the GDP deflator (nominal GDP/real GDP) rose by 2.3% year-on-year. The GDP deflator was 1.6% in the second quarter.

Experts agree that the economic outlook for next year may also be impacted by factors such as the Omicron variant.

Jung Kyu-cheol, head of the Economic Outlook Office at the Korea Development Institute (KDI), said, "Since it is already early December, it seems likely that the annual 4.0% growth will be achieved, but economic uncertainty for next year has increased. The impact of Omicron on the economy may vary depending on analysis, but if quarantine systems are strengthened and lockdown measures continue in various countries, exports and consumption could decline."