Under the Hood of Korean GDP Lies a Disappointing Exports Story

Here’s one takeaway from data Thursday that showed South Korea’s gross domestic product in the third quarter was better than initially estimated, growing at the fastest pace in more than five years: Net exports were the biggest drag on the economy’s growth since 2013.

  • Net exports stripped 0.8 percentage points from quarter-on-quarter growth, while domestic demand added 2 percentage points, according to figures released by the Bank of Korea.
  • With a drop of overseas shipments in October and November for both volume and value suggesting that the impact of net exports on growth will again be negative in the fourth quarter, a sustained recovery in Korea’s economy depends on spending and investment continuing to improve. 
  • Sales to most major markets fell this year, with exports to China -- Korea’s biggest trading partner -- dropping 4.5 percent through November from a year earlier, while those to Japan fell 21 percent.
  • An economic slowdown in China and waning global demand for key Korean products including petrochemicals and steel are hurting the nation’s exports.
  • While the BOK forecasts 2.7 percent GDP growth in 2015 and 3.2 percent in 2016, analysts are more pessimistic, with a Bloomberg survey of economists showing expectations for 2.5 percent and 2.9 percent growth, respectively.
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