South Korea’s gross domestic product, a key indicator of economic growth in the first quarter of this year, rose 0.3 percent from the previous quarter, according to preliminary data from the Bank of Korea.
The first-quarter expansion was followed by a contraction of 0.3%, on a quarterly basis, in the fourth quarter of last year, meaning the economy narrowly avoided recession.
Technically speaking, two consecutive quarters of economic contraction is a recession.
Korea’s economy grew 0.9% year-on-year in the first quarter, compared with a 1.4% year-on-year gain in the fourth quarter.
Economists polled by Reuters had forecast growth of 0.8% year-on-year in the first quarter.
The latest figure corresponds to the central bank’s previous estimate announced in early April. And reflect the latest data on industrial production and other major economic indicators.
Growth in the first quarter was attributed to a moderate recovery in private spending spurred by the easing of virus-related restrictions.
Private spending in the first quarter increased by 0.6% compared to the previous quarter, while investment in construction increased by 1.3%, public spending increased by 0.4%, but investment in utilities increased by 5%.
Exports rose 4.5% on a quarterly basis in the first quarter, compared with a 3.8% decline in the fourth quarter, the data showed.
South Korea’s economy faces growing uncertainty both at home and abroad amid fears that rapid monetary tightening in major countries including the United States could precipitate a global recession. .
Korean exports have declined year-on-year since October last year amid significant monetary tightening by major economies to curb inflation.
Private spending will likely be affected by rising interest rates.
The country’s central bank froze its main interest rate at 3.5% for the third consecutive time as it lowered its growth estimates for this year in the face of a prolonged slowdown in exports amid subdued inflation.
It is the third time in a row that the Bank of Korea has maintained its position after freezing interest rates twice, the first in February and the second in April. The interest rate freeze came after the Bank of Korea raised borrowing costs seven times in a row since April last year.
The central bank also lowered its domestic economic growth forecast for this year from a previous estimate of 1.6% to 1.4% as exports are expected to remain weak.
Last year, the country’s economy grew 2.6%, slowing from 4.1% growth in 2021 amid strong monetary tightening at home and abroad.
Growth in 2022 was the slowest since 2020, when the economy contracted 0.7% due to the fallout from the coronavirus pandemic.
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