Small Growth In The South Korean Economy Is Supported By Revenge Spending

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Last Updated on October 27, 2022 by Bitfinsider

Even if the world economy is headed for a recession, South Korea’s economy experienced a slight gain due to “revenge spending” once the country reopened.

According to figures from the Bank of Korea, the gross domestic product increased 0.3% from July to September, the weakest quarterly rise in a year. The preceding quarter saw a 0.7% increase.

Kathleen Oh, Bank of America’s Korea economist, stated on CNBC’s “Squawk Box Asia” that she believes the domestic momentum to be rather resilient.

“Consumption is holding up well with the reopening and pent-up demand in services,” she said, adding that domestic demand is projected to sustain growth over the remainder of the year.

The South Korean GDP report for the third quarter revealed that growth was mostly driven by consumer expenditure and investment in infrastructure, which increased by 1.9% and 5%, respectively.

According to the Korea Culture and Tourism Institute, from January to October, the total amount spent on tourism and leisure activities was approximately 67 trillion won ($47.2 billion). Even though it was more than 5% lower than the same time period in 2019, before the epidemic, it nevertheless increased by more than 21% from the previous year.

The expenditures decreased by more than 28% in 2020 compared to the same time in 2019 and remained constant in 2021.

“Private consumption maintained a robust rate of growth,” Goldman Sachs analysts wrote in a Thursday report, adding that it was greater than anticipated and driven by spending on autos and services.

Additionally, ING economists stated, “Reopening-enhanced pent-up consumer spending slowed while investment exhibited a more robust rebound.”

Goldman Sachs economists recently lowered their outlook for South Korea’s growth in 2023 from 1.7% to 1.4%.

“The primary reasons for our more pessimistic growth outlook are the current and anticipated deterioration in external demand,” the economists wrote in a note.

They alluded to the possibility of a global slow economy affecting domestic demand, in addition to local headwinds such as monetary tightening and, in the case of South Korea, fiscal consolidation.


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