South Korea’s Economy Maintains Growth in Q1, Fueled by Exports
South Korea’s economy grew by an estimated 0.6% in the first quarter of 2023, maintaining the same pace of expansion as in the previous three months. This growth was primarily driven by strong exports, which offset a slowdown in household consumption.
The trade-dependent economy benefited from a resurgence in semiconductor exports, a positive indicator for global trade. Gross domestic product (GDP) for the January-March period grew 0.6% quarter-on-quarter on a seasonally adjusted basis, according to economists surveyed by Reuters.
On a year-on-year basis, GDP is projected to have expanded by 2.4%, the fastest growth rate since Q3 2022. However, potential economic headwinds include uneven growth in China, South Korea’s biggest trading partner, and the impact of interest rate hikes on consumer spending.
Despite strong exports, consumer demand remains a weak point due to elevated interest rates and a cooling labor market. The Bank of Korea has indicated that it needs to see inflation moving towards its 2% target before considering lowering borrowing costs, which could prolong pressure on already slowing consumption.
