Bank of Korea Announces South Korea's Q3 Economic Growth Rate
Rises Only 0.1% Quarter-on-Quarter, Export Concerns Grow
Real GNI Increases 1.4% Quarter-on-Quarter
In the third quarter of this year, our economy grew by only 0.1% compared to the previous quarter. The export sector, which had been driving economic growth, showed signs of slowing down, casting a gloomy outlook for future growth. Although national income slightly increased in the third quarter, considering the decline in the previous quarter, it was essentially stagnant.
According to the preliminary national income data released by the Bank of Korea on the 5th, South Korea's real Gross Domestic Product (GDP) in the third quarter grew by 0.1% quarter-on-quarter. This is the same as the flash estimate announced in October.
As a result of adding statistics that were not reflected in the flash estimate, exports (+0.2 percentage points), imports (+0.1 percentage points), and intellectual property product investment (+0.1 percentage points) were revised upward, while construction investment (-0.8 percentage points) and facility investment (-0.4 percentage points) were revised downward.
Looking at our quarterly growth rate, there was a positive growth trend for five consecutive quarters from the first quarter of last year to the first quarter of this year, but it plunged to -0.2% in the second quarter. Following the second quarter, the third quarter growth rate also remained at 0.1%, raising concerns about structural low growth. The Bank of Korea forecasted the country's economic growth rate to be 1.9% next year and 1.8% the year after, warning that our economy could fall into a persistent low-growth trap below the potential growth rate (2.0%).
By sector, exports decreased by 0.2%, mainly in automobiles and chemical products. Construction investment also declined by 3.6%, centered on building construction, leading to an overall slowdown in growth. On the other hand, imports increased by 1.6%, mainly in machinery and equipment.
Kang Chang-gu, head of the National Accounts Department at the Bank of Korea's Economic Statistics Bureau, explained, "Automobile exports decreased in the third quarter due to the impact of strikes, and the chemical sector was affected by weak demand from China," adding, "Exports have continued to show signs of slowing down into the fourth quarter."
Private consumption increased by 0.5% quarter-on-quarter, with both goods (such as passenger cars) and service consumption (medical, transportation, etc.) rising. Government consumption grew by 0.6%, mainly due to social security in-kind benefits (health insurance benefits). Facility investment increased by 6.5%, with growth in machinery (such as semiconductor manufacturing equipment) and transportation equipment (such as aircraft).
Regarding the contribution to the third quarter growth rate, net exports (exports minus imports) recorded -0.8 percentage points, cutting nearly 1 percentage point from the growth rate. The domestic demand, which was a concern, raised the growth rate by 0.8 percentage points, thanks to improvements in facility investment (+0.6 percentage points) and private consumption (+0.3 percentage points). However, construction investment reduced the growth rate by 0.5 percentage points.
By industry, electricity, gas, and water supply grew by 5.6%, centered on all enterprises. Agriculture, forestry, and fisheries and manufacturing also increased by 2.4% and 0.2%, respectively. The service sector declined in wholesale and retail, accommodation and food services, and culture, but increased by 0.2% due to strong performance in medical, health, social welfare services, and information and communication industries. However, construction decreased by 1.4%, mainly in building construction.
Real Gross National Income (GNI) in the third quarter increased by 1.4% quarter-on-quarter. Real GNI is an indicator of the real purchasing power of income earned by our nationals domestically and abroad. Considering that real GNI decreased by 1.4% in the second quarter, national income was essentially stagnant.
The increase in real GNI in the third quarter was influenced by improved terms of trade due to the decline in international oil prices, reducing real trade losses from 16.6 trillion won in the previous quarter to 14.2 trillion won in the third quarter. Kang said, "The decline in international oil prices improved import conditions for chemical products, leading to an increase in real GNI."
During the same period, real net primary income from abroad increased from 4.4 trillion won to 9.2 trillion won, improving real GNI. Real net primary income from abroad is the amount earned by our nationals abroad minus the amount earned by foreigners domestically.
Nominal GNI in the third quarter decreased by 0.5% compared to the previous quarter. However, nominal net primary income from abroad increased from 7.3 trillion won to 9 trillion won, which was higher than the nominal GDP growth rate (-0.8%).
The GDP deflator, an index representing the overall domestic price level, rose by 3.5% year-on-year. The gross savings rate (34.4%) fell by 0.8 percentage points from the previous quarter, and the gross domestic investment rate was 29.9%, down 0.8 percentage points from the previous quarter.
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