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S. Korea’s economy returns to growth in Q3 due to improved exports

BOK calls for prudence amid uncertainties; finance minister expresses hope for recovery

Park Yang-su, economic statistics director at the Bank of Korea, speaks Tuesday in a press briefing. (BOK)
Park Yang-su, economic statistics director at the Bank of Korea, speaks Tuesday in a press briefing. (BOK)

The South Korean economy in the July-September period marked the first quarterly expansion since the COVID-19 outbreak, reflecting the recent rebound in exports, central bank data showed Tuesday.

While the government displayed some optimism over the latest turnaround, monetary authorities continued their wait-and-see approach, citing uncertainties such as the imminent US presidential election and the apparent coronavirus flare-up in Europe.

The country’s real gross domestic product for the July-September period climbed 1.9 percent from the previous quarter, showing the steepest quarterly rise since the first quarter of 2010, according to data compiled by the Bank of Korea.

Throughout the first half of the year Korea’s economic growth remained in the negative range due to the pandemic fallout, contracting 1.3 percent on-quarter for January-March and 3.2 percent for April-June. The second quarter reading marked the steepest dip since the fourth quarter of 2008, when the global financial crisis was still going on.

In August the BOK revised its outlook to predict that the Korean economy would contract 1.3 percent on-year in 2020, on the premise that the nation would attain at least 1.5 percent growth for the third and fourth quarters.

“Due to the higher-than-expected 1.9 percent growth for the third quarter, there is some room to expect an upward revision of the yearly growth outlook,” said Park Yang-su, economic statistics director at BOK, in a press briefing.

If the economy grows 0.4 percent or more during the final quarter, the country will likely reach the outlook figure or even move beyond it, according to Park.

The game changer was exports, which expanded 15.6 percent on-quarter on the back of improved business in the automobile and semiconductor industries. Imports also climbed 4.9 percent on-quarter, mostly in the crude oil and chemical goods sectors.

While the government’s aggressive execution of the extra budgets was seen as a factor in offsetting the damage, the COVID-19 flare-up here -- which prompted the authorities to tighten social distancing to Level 2.5 -- is estimated to have lowered quarterly growth by 0.4-0.5 percentage point, according to the BOK analysis.

But the BOK used its discretion in changing its previous outlooks, citing uncertainties such as the new waves of COVID-19 observed in the United States and Europe.

“Given these risk factors, annual growth figures still remain in the range of previous projections,” Park said.

He also refrained from using the term “V-shaped recovery,” pointing out that quarterly growth had not yet recovered to pre-pandemic levels.

The monetary authorities’ more prudent approach stood in contrast with that of the fiscal policy headquarters.

Following the BOK data release, Deputy Prime Minister and Finance Minister Hong Nam-ki said the economy was on the road to recovery.

“Based upon economic situations up to the third quarter, we may assess that (Korea) has successfully contained the COVID-19 spread and its consequences,” Hong wrote on Facebook.

Had it not been for the second wave of COVID-19 in mid-August, the country’s quarterly growth for July-September would likely have surpassed the 2 percent mark, extending the recovery signal detected late in the second quarter, he added.

The fiscal chief nevertheless vowed to keep a stern watch on global uncertainties.

“Our economy continues to face both favorable factors and risks in the fourth quarter,” he said.

“Considering the epidemic aggravation signals in Europe, the US presidential election and the US-China tension, we should not let our guard down.”

By Bae Hyun-jung (