South Korea’s worst quarterly economic performance on strong base effect

Stocks in South Korea

The economy of South Korea experienced its most unpleasant quarter in December, unable to meet forecasts and making the worst quarterly economic performance since the year 2008 due to a strong base effect as well as a long autumn holiday which impeded industrial production.

According to the Bank of Korea on Thursday, Korea’s gross domestic product dropped by 0.2 percent, seasonally adjusted, in its last quarter of the year. Losing traction from a bumper growth of 1.5 percent during the third quarter, marking the fastest expansion in seven years.

Despite the disappointing quarter, the full GDP growth for 2017 was at 3.1 percent compared to 2016’s 2.8 percent.

The fourth quarter contraction in 2017 fell short under the 0.1 percent expansion expected by economists which marks the worst quarterly performance since the economy contracted by 3.3 percent in the last quarter of the year 2008.

The economy grew 3.0 percent from the previous year, losing momentum from the 3.8 percent growth during the September quarter.

The data revealed on Thursday supported a wide consensus that the monetary tightening from the central bank will take a slow implementation this since year investment and export led growth subsides after a quick expansion in 2017.

November’s hike marked its first tightening in six years. The BOK is observing the effects of the said hike, and will remain cautious of kickstarting disruptive capital flows.

BOK’s policy interest rate remained unchanged at 1.50 percent on January 18, it slightly went up a from the 2.9 percent October projection to 3 percent according to its 2018 growth forecast.


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