Xinhua, Seoul :
South Korea’s real gross domestic product (GDP) fell in the first quarter on weak export, but the country’s finance ministry said it came mainly from one-off factors and forecast a rebound in the following quarter.
Preliminary figure for the real GDP, adjusted for inflation, shrank 0.3 percent in the January-March quarter from the previous quarter, Bank of Korea (BOK) data showed Thursday. The real GDP grew 1 percent in the fourth quarter of last year.
It was the lowest since the fourth quarter of 2008 when the global financial crisis negatively influenced the export-driven economy. The latest negative GDP growth was tallied in the fourth quarter of 2017 when the real GDP dipped 0.2 percent.
From a year earlier, the real GDP rose 1.8 percent, posting the lowest in nine and a half years since the third quarter of 2009.
The quarter-over-quarter GDP reduction was far below market expectations of a range of 0.2-0.3 percent expansion, leading to the fluctuation in the local financial market. The South Korean currency fell versus the U.S. dollar and the main Kospi stock index slipped on worry about economic slump.
A senior finance ministry official, who declined to be identified, said the lower-than-expected GDP fall was attributed to the delayed fiscal spending, noting that the negative growth would be temporary.
During the quarter, the government spending was put off due to one-off factors such as infrastructure investments, which were in the process of designing and had yet to start construction works, and the postponement in purchase of weapons. The delayed fiscal expenditure lowered the GDP growth rate by 0.7 percentage points in the first quarter, while the government spending raised it by 1.2 percentage points in the prior quarter, according to the BOK.
As the unspent fiscal expenditure was to be reflected in GDP readings throughout the rest of this year, the real GDP was expected to rebound from the second quarter, the finance ministry official noted.
Finance Minister Hong Nam-ki, who doubles as deputy prime minister for economic affairs, told reporters that the government will continue deregulation efforts to encourage the private sector to make investments, in addition to the supplementary budget, which was submitted earlier in the day to the National Assembly for approval.
The finance ministry unveiled this year’s extra budget bill worth 6.7 trillion won (5.8 billion U.S. dollars), which was forecast to raise the real GDP growth rate by 0.1 percentage point. The government set its growth target at a range of 2.6-2.7 percent.
Considering the tax revenue surplus of 10.5 trillion won (9 billion U.S. dollars) that was distributed early this month to local governments, the extra budget effect to stimulate the economy would be bigger than last year, the finance ministry official said.
In 2018, the central government spent 3.8 trillion won (3.3 billion U.S. dollars) for the supplementary budget, while 6 trillion won (5.2 billion U.S. dollars) of tax revenue surplus was given to local governments.
Meanwhile, the first-quarter GDP fall was led by export, which accounts for about half of the export-driven economy.
Export declined 2.6 percent in the first quarter on a quarterly basis, while import reduced 3.3 percent. The outbound shipment kept falling since December last year.
Facility investment tumbled 10.8 percent in the quarter, and investment in the construction sector shed 0.1 percent on the government’s efforts to control speculative investment in the real estate market.
Before the announcement of measures last year to curb the property market, households rushed to purchase new home with borrowed money amid the record-low interest rate and eased regulations on mortgage loans. It resulted in a boom in the construction sector, artificially expanding the real GDP growth.
South Korea’s real gross domestic product (GDP) fell in the first quarter on weak export, but the country’s finance ministry said it came mainly from one-off factors and forecast a rebound in the following quarter.
Preliminary figure for the real GDP, adjusted for inflation, shrank 0.3 percent in the January-March quarter from the previous quarter, Bank of Korea (BOK) data showed Thursday. The real GDP grew 1 percent in the fourth quarter of last year.
It was the lowest since the fourth quarter of 2008 when the global financial crisis negatively influenced the export-driven economy. The latest negative GDP growth was tallied in the fourth quarter of 2017 when the real GDP dipped 0.2 percent.
From a year earlier, the real GDP rose 1.8 percent, posting the lowest in nine and a half years since the third quarter of 2009.
The quarter-over-quarter GDP reduction was far below market expectations of a range of 0.2-0.3 percent expansion, leading to the fluctuation in the local financial market. The South Korean currency fell versus the U.S. dollar and the main Kospi stock index slipped on worry about economic slump.
A senior finance ministry official, who declined to be identified, said the lower-than-expected GDP fall was attributed to the delayed fiscal spending, noting that the negative growth would be temporary.
During the quarter, the government spending was put off due to one-off factors such as infrastructure investments, which were in the process of designing and had yet to start construction works, and the postponement in purchase of weapons. The delayed fiscal expenditure lowered the GDP growth rate by 0.7 percentage points in the first quarter, while the government spending raised it by 1.2 percentage points in the prior quarter, according to the BOK.
As the unspent fiscal expenditure was to be reflected in GDP readings throughout the rest of this year, the real GDP was expected to rebound from the second quarter, the finance ministry official noted.
Finance Minister Hong Nam-ki, who doubles as deputy prime minister for economic affairs, told reporters that the government will continue deregulation efforts to encourage the private sector to make investments, in addition to the supplementary budget, which was submitted earlier in the day to the National Assembly for approval.
The finance ministry unveiled this year’s extra budget bill worth 6.7 trillion won (5.8 billion U.S. dollars), which was forecast to raise the real GDP growth rate by 0.1 percentage point. The government set its growth target at a range of 2.6-2.7 percent.
Considering the tax revenue surplus of 10.5 trillion won (9 billion U.S. dollars) that was distributed early this month to local governments, the extra budget effect to stimulate the economy would be bigger than last year, the finance ministry official said.
In 2018, the central government spent 3.8 trillion won (3.3 billion U.S. dollars) for the supplementary budget, while 6 trillion won (5.2 billion U.S. dollars) of tax revenue surplus was given to local governments.
Meanwhile, the first-quarter GDP fall was led by export, which accounts for about half of the export-driven economy.
Export declined 2.6 percent in the first quarter on a quarterly basis, while import reduced 3.3 percent. The outbound shipment kept falling since December last year.
Facility investment tumbled 10.8 percent in the quarter, and investment in the construction sector shed 0.1 percent on the government’s efforts to control speculative investment in the real estate market.
Before the announcement of measures last year to curb the property market, households rushed to purchase new home with borrowed money amid the record-low interest rate and eased regulations on mortgage loans. It resulted in a boom in the construction sector, artificially expanding the real GDP growth.
