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Second-quarter growth is revised lower

Revision brings into doubt recent full-year GDP forecasts
Sept 04,2019
The Bank of Korea revised down second-quarter GDP growth, raising concerns that the government’s full-year projection of 2.4 to 2.5 percent growth will not be achieved.

According to the central bank on Tuesday, growth in the April to June period was 1.0 percent, 0.1 percentage points below the second quarter figure reported in July.

On year, the economy grew 2 percent in the second quarter, revised from 2.1 percent.

The bank said that a revision in exports and government spending were responsible for the adjustment.

While the quarterly growth in facilities investment was adjusted upwards by 0.8 percentage points compared to initial estimates in July, both government spending and export growth were lowered 0.3 percentage points.

The central bank revised the government’s spending increase from 2.5 percent to 2.2 percent while export growth was changed from 3.2 percent to 2.9 percent.

Annual figures were also adjusted.

Government spending was up 7.3 percent on year in the second quarter, according to the July report. In the latest report, that number was changed to 7 percent.

Exports were initially estimated to have grown 0.1 percent. But that figure was revised to unchanged.

Manufacturing was also adjusted downward. In July, manufacturing was estimated to have grown 1.8 percent on quarter in the second quarter and 1.5 percent annually.

But in the latest report, it grew at a slower rate of 1.1 percent quarterly, while annually it only grew by 0.8 percent, barely half its previous estimate.

Services growth was revised upward. While in July’s estimate the service sector grew 0.6 percent quarterly and 2.5 percent annually, in the latest version, quarterly it grew 0.8 percent and annually 2.7 percent.

The central bank attributed the sharper increase in services to growth in medical and welfare spending.

As the economic growth was adjusted downward, there are growing concerns as to whether the economy could reach the Moon Jae-in administration’s targeted growth by the end of this year or even the more conservative growth forecast made by the central bank.

While the Finance Ministry projects this year’s growth between 2.4 percent and 2.5 percent, the central bank projects 2.2 percent.

The Korean economy is already being buffeted by numerous headwinds, including the escalating trade dispute between U.S. and China as well as tensions between Korea and Japan.

Korean exports have been declining for nine consecutive months.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]