South Korea’s Second-Quarter GDP Growth Anticipated to Slightly Surpass First-Quarter, According to Reuters

SEOUL (Reuters) – South Korea’s economic growth is anticipated to show little change from April to June compared to the previous quarter, according to a Reuters poll conducted on Monday. Weak exports and capital investment are continuing to hinder overall growth.

The economy is projected to expand by 0.7 percent in the second quarter compared to the first, on a seasonally adjusted basis, reflecting a slight improvement from the 0.5 percent growth recorded in January-March.

If the second quarter growth figures fall short, it is unlikely to catch market participants off guard, as both Bank of Korea Governor Lee Ju-yeol and Finance Minister Yoo Il-ho have voiced concerns about declining private consumption amid ongoing economic weakness.

“Any growth below 1 percent is concerning. Consumption is weak, and overall recovery appears to be slowing,” stated Chae Hyun-kee, an economist at KTB Securities.

The survey also predicts that year-on-year growth for the second quarter is expected to be 2.9 percent, following a 2.8 percent increase in the first quarter.

Most analysts believe that the economy could receive some relief in the third quarter due to a surprise interest rate cut by the Bank of Korea in June. There is a general consensus that another rate cut might occur by year-end. However, analysts warn that any potential improvement will likely be modest.

“The third quarter is expected to remain sluggish. If the extra budget is approved swiftly, a rapid downturn may be averted, but it will be challenging to fully reverse the current trend,” noted June Park, an economist at Daishin Economic Research Institute.

Following the June rate cut, the policy base rate currently stands at a record low of 1.25 percent. Earlier this month, the Bank of Korea revised down its growth forecast for the year from 2.8 percent to 2.7 percent.

The finance ministry plans to present a supplementary budget draft of 11 trillion won (approximately $9.69 billion) to parliament this week. The quicker lawmakers can ratify the budget, the sooner the economic boost will be felt.

South Korea’s extra budget aims to create 68,000 new jobs to offset significant job losses in the struggling shipping and construction sectors.

The government has intensified its restructuring efforts this year as the trade-dependent economy has faced declining shipments since January 2015.