 |
| Shoppers push carts around at a supermarket in Seoul, April. 13. Yonhap |
By Yi Whan-woo
The Korean economy grew 0.3 percent in the first quarter of 2023 from three months earlier, thanks to an increase in private spending that helped the trade-reliant economy escape recession amid a prolonged slowdown in exports.
Announced in the Bank of Korea's (BOK's) preliminary data, Tuesday, the latest quarterly growth comes after Asia's fourth-largest economy shrank by 0.4 percent quarter-on-quarter in the October-December period.
The economic contraction prompted concerns that the country may slip into a recession ― a fall in gross domestic product (GDP) for two consecutive quarters ― as both exports and private spending struggled.
Exports and private spending are the two main drivers of Korea's GDP.
Against this backdrop, domestic consumption advanced 0.5 percent quarter-on-quarter in the first three months of this year. Its growth was backed by the removal of social distancing regulations that prompted action on pent-up demand for overseas travel, leisure activities and the service sector.
"The increase in private spending is attributable to an increase in face-to-face activities as indoor mask rules have been lifted," a senior BOK official said.
Domestic consumption was the biggest contributor to the GDP, accounting for 0.3 percentage points of the growth.
The 0.3 percentage point contribution offset the adverse effects of net exports that pulled down growth by 0.1 percentage points.
Net exports adversely affected GDP for the fourth consecutive quarter since the January-March period of 1999 when the country was reeling from the 1997-98 Asian financial crisis.
Experts said Korea is likely to continue averting recession, but underlined that the country still faces headwinds stemming from sluggish exports.
"The GDP is expected to expand in coming quarters this year, but the level of growth will be barely enough to avoid a recession," said Joo Won, deputy director of Hyundai Research Institute.
He noted the global demand for semiconductors, a key export item, still staggers although overall exports increased 3.8 percent quarter-on-quarter in the January-March period, a turnaround from a 4.6 percent decline in the previous quarter.
The weakened demand for chips is due to a slower-than-expected spillover effect from China's reopening.
Semiconductors make up nearly 40 percent of Korea's outbound shipments to China. Accordingly, China's share of total Korean exports stands at 19.8 percent so far this year compared to 22.8 percent in 2022, 25.3 percent in 2021 and 25.9 percent in 2020.
"Taking the dim export outlook into account, I'd say the GDP will grow 0.5 percent or less in the remaining three quarters," Joo said.
Lee Geun-tae, an economist at LG Economic Research Institute, forecast that private spending will continue to expand at a level that can barely offset the negative impact of exports on GDP.
"The pent-up demand on service sectors after the end of social distancing rules is anticipated to last throughout the year, but not large enough to bolster growth drastically," he said.
![[INTERVIEW] Virtual K-pop group MAVE: is more than just pretty pixels](https://img.koreatimes.co.kr/upload/thumbnailV2/bcc387606cf7451c94f51a5978960c9f.jpg/dims/resize/178/optimize)
![[INTERVIEW] 'Cobweb' director questions meaning of cinema](https://img.koreatimes.co.kr/upload/thumbnailV2/a029c9ea411f4aef94c6310f6a7c3c54.jpg/dims/resize/178/optimize)
![[INTERVIEW] Seoul's increased art market momentum brings Sotheby's back to Korea](https://img.koreatimes.co.kr/upload/thumbnailV2/3439cc1e2d744b85ab81fdcf6f045ba5.jpg/dims/resize/178/optimize)
