South Korea's economy likely saw steady economic growth in Q1: Reuters poll

Veronica Today by Mia Kongwir

BENGALURU (Reuters) – South Korea's economy may have grown 0.6% last quarter, maintaining the same pace of expansion as in the previous three months, as domestic consumption weakened as exports improved, a Reuters poll of economists found.

The trade-oriented economy saw a significant uptick in export performance last quarter, buoyed by a revival in the semiconductor sector, a good indicator of global trade health.

Gross domestic product (GDP) rose 0.6% quarter-over-quarter for the January-March quarter, the same as the previous quarter, according to the median estimate of 21 economists polled on April 17-22. Estimates range from 0.3% to 1.1%.

„Consumer demand remains a weak point. Retail sales data from January and February continue to be weak on spending. We expect higher interest rates and a cooling labor market to soften demand further,” wrote Gareth Leather, senior Asia economist at Capital Economics. .

„Conversely, production and exports are strong, helped by increased global demand for semiconductors. We expect exports to remain modest – although global growth may struggle in the near term, a turn in the technology cycle should ensure exports. Growth remains good.”

On a year-on-year basis, GDP is expected to expand 2.4% last quarter, faster than the 2.2% growth in the previous quarter, according to the median estimate of 25 economists.

If realized, this would be the fastest growth rate since Q3 2022.

However, uneven growth in China, South Korea's largest trading partner and a key driver of the global economy, could derail the current recovery.

Also, Asia's fourth-largest economy, one of the world's most indebted, has seen slower growth as spending has been constrained by a cumulative 300 basis points of interest rate hikes by the Bank of Korea (BOK) from August 2021.

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The central bank said it would need to see inflation move towards the bank's 2% target and consider cutting borrowing costs, which would extend pressure on already-decreasing consumption. Inflation stood at 3.1% in March.

(Reporting by Veronica Dudei Maia Khongwir; Polling by Anand Chandak and Miloni Purohit; Editing by Jonathan Gable and Hugh Lawson)

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