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Korea’s Growth Slows as Global Cooling Caps Export Demand

South Korea’s Growth Slows as Global Cooling Caps Export Demand
A group of women eat street food in the shopping district of Myeongdong in Seoul, South Korea. Photographer: Jean Chung/Bloomberg

Oct. 26 (Bloomberg) -- South Korea’s economy grew at the slowest pace in three years as Europe’s debt crisis and a slowdown in emerging markets reduced corporate investment and capped demand for exports.

Gross domestic product expanded 1.6 percent in the three months through September from a year earlier, the slowest pace since 2009, Bank of Korea data showed today. That compares with the median 1.7 percent estimate of 13 economists surveyed by Bloomberg News. Asia’s fourth-largest economy grew 0.2 percent from a quarter ago.

Samsung Electronics Co., whose annual sales are the equivalent of 13 percent of gross domestic product, today reported higher-than-estimated earnings, bolstering the view that the worst of the slowdown has passed. The gains by the world’s biggest maker of mobile phones may also support the government’s wait-and-see stance on any further stimulus for the economy.

“This confirms that the Korean economy is at the bottom,” said Sun Yoo, an economist at Woori Investment & Securities Co. in Seoul. “Growth is weak but it is there, with slight upturns in exports and domestic consumption.”

South Korea’s won strengthened 0.1 percent to 1,096.95 per dollar at 9:10 a.m. in Seoul, the strongest level since September last year, according to data compiled by Bloomberg. The benchmark Kospi Index fell 0.4 percent.

Less Confidence

Consumer confidence in South Korea fell to a nine-month low in October, according to a separate BOK statement today.

The BOK lowered its forecast for the nation’s 2012 growth on Oct. 11 to 2.4 percent from a July estimate of 3 percent. The economy will expand 3.2 percent next year, and the inflation rate this year will be 2.3 percent, it said, below an earlier prediction of 2.7 percent.

Finance Minister Bahk Jae Wan said in an Oct. 9 interview that the nation’s economy may see a “weak” rebound this quarter after hitting bottom in the previous three months. The BOK has cut rates twice this year and the government has unveiled 14.4 trillion won ($13.1 billion) of economic support measures.

The world economy will grow 3.3 percent this year, the slowest since the 2009 recession, and 3.6 percent next year, compared with July predictions of 3.5 percent in 2012 and 3.9 percent in 2013, the International Monetary Fund said on Oct. 9. It also reduced its forecasts for South Korea, now projecting 2.7 percent growth for 2012 and 3.6 percent for 2013.

Economy ‘Doldrums’

A global economy that “remains in the doldrums” has delayed a recovery in South Korea’s steel industry, Posco Chief Financial Officer Park Ki Hong told investors on Oct. 23.

Posco, Asia’s third-biggest steelmaker by output, cut its 2012 sales forecast for the third time this year after quarterly profit missed analyst estimates.

South Korea’s exports fell for a third straight month in September from a year earlier. Sales at major South Korean department stores declined for the fourth straight month in September as slowing economic growth weighed on confidence, according to a government report on Oct. 18.

To contact the reporters on this story: Cynthia Kim in Seoul at ckim170@bloomberg.net; Eunkyung Seo in Seoul at eseo3@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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