South Korea’s economy grew 0.8 percent in the second quarter, revised data from the Bank of Korea showed on Friday, but third quarter growth faces downside risks including from delays in ratifying a much-anticipated supplementary budget.
The June quarter’s 0.8 percent expansion is marginally better than a 0.7 percent rise estimated earlier by the bank. In annual terms, growth was at 3.3 percent, also slightly above an earlier estimate of 3.2 percent.
Friday’s figures come as production and inflation data from July onwards show the economy may fail to rebound and even decline, hit by sluggish exports and weak consumption. July factory output declined 0.6 percent from June, while inflation slowed to a one-year low in August.
A finance ministry official said growth was likely to slow in the third quarter from the second as a temporary tax cuts on cars expired. Still, he expected the economy to post about 2.8 percent growth this year, in line with the government forecast. Approval of a supplementary budget would protect the economy from a sharp downturn, he added, assuming that the ruling and opposition parties approve the 11 trillion won spending shortly, as agreed at the parliament’s budget committee. Approval has been delayed as parties contested political issues.
“Judging from the full set of data, we maintain the view that GDP growth will slow to about 2.5 percent in Q3 from 2.9 percent in Q2,” DBS Group Research wrote in a report. “More downside risks will lie ahead in the fourth quarter. The progress of corporate restructuring is picking up, which should have negative spillover effects on the broad economy,” it said.
A government-led restructuring of debt-ridden shipbuilding and shipping industries is an ongoing concern for an economy centred on manufacturing and exports. Hanjin Shipping Co., the nation’s largest container shipping company, applied for court receivership this week after lenders halted financial support.
Finance minister Yoo Il-ho said on Wednesday that the government will take measures to minimise the economic and industrial impact from the Hanjin case.