South Korea’s economic growth slowed in the third quarter as strong exports were offset by weak domestic consumption due to the country’s tougher Covid-19 restrictions, clouding the Bank of Korea’s forecast for another rate increase this year.
Gross domestic product rose 0.3 percent in the July-September period, slowing from 0.8 percent in the second quarter and missing a 0.6 percent growth forecast in a Reuters survey.
Asia’s fourth-largest economy expanded 4 percent from a year earlier, slowing sharply from 6 percent growth in the second quarter, which was the fastest in a decade.
Weak quarterly growth was widely expected as health authorities struggle to contain the country’s worst outbreak of the virus after daily infections rose to more than 1,000 since July. Exports rose 1.5 percent in the third quarter from the previous quarter, while private consumption declined 0.3 percent.
The Bank of Korea said in a webinar on Monday that consumption is expected to rise in the current quarter, helped by increased vaccinations and a transition to “living with Covid-19.” More than 70 percent of the country’s population of 51 million has been fully vaccinated.
The bank cited China’s energy crisis and supply chain bottlenecks as downside risks to the Korean economy even though exports remain strong. Outbound shipments jumped 36.1 percent in the first 20 days of October from a year earlier, according to customs data.
Bank of Korea Governor Lee Ju-yeol said the central bank will consider raising interest rates again in November after South Korea became the first major Asian economy in August to tighten monetary policy since the epidemic spread.
The Bank of Korea is widely expected to raise its benchmark interest rate by 25 basis points to 1 percent on November 25 to mitigate rising financial risks amid rising inflation and household debt.
“While the Korean recovery lost some momentum in the last quarter of the year due to the impact of the virus on growth, the economy should pick up pace again this quarter as higher vaccination levels allow for a rollback of containment measures,” said Alex Holmes, Asia economist at Capital Economics. “. Report. “[But] It is unlikely that the Bank of Korea will be deterred from tightening further due to today’s data.”