(Corrects typographical error in lede.)
SEOUL (Reuters) – South Korea’s economy grew at a slower-than-expected pace in the third quarter, as subdued private consumption and weak construction and facility investment offset robust exports.
Gross domestic product (GDP) grew a seasonally adjusted 0.3% in the third quarter, the Bank of Korea (BOK) data showed on Tuesday, the slowest in five quarters and following a 0.8% rise in the preceding three months. It also fell short of the 0.6% growth tipped in a Reuters survey.
Private consumption, which generates nearly half of South Korean GDP, contracted 0.3% in the September quarter after a 3.6% rise in the second quarter, while construction and facility investments also swung to declines of 3.0% and 2.3%, respectively.
Exports grew 1.5%, recovering from the June quarter’s 2.0% contraction, on strong sales of semiconductors and petroleum products.
“The toughened social distancing measures and impacts from the heat wave and rising raw material prices that continued over the third quarter seem to have limited the recovery in domestic demand … but exports were seen propping up the economy,” Finance Minister Hong Nam-ki said.
From a year earlier, the economy expanded 4.0%, in part because of the low base last year, while both exports and imports picked up further on global economic recovery.
That was, however, a significant slowdown from the second quarter’s 6.0% growth, and missed market forecast growth of 4.2%.
“The data does not diverge much from the August projection. Annual growth of 4% will be possible should the economy expand 1.04% on a sequential basis during the fourth quarter,” a senior BOK official Hwang Sang-pil told reporters.
The BOK currently sees the economy growing 4% for the whole of 2021 after shrinking 0.9% last year.
Economists, however, are concerned global supply chain disruptions and inflation pressures may pose risks to the fourth-quarter outlook.
“The near-term outlook for exports and manufacturing sector is likely to be clouded by sustained concerns about the global supply bottleneck,” Societe Generale’s economist Oh Suk-tae said.
But the economy could regain steam as the government aims to scrap the COVID-19 curbs by early 2022, which could add a further boost to consumption. The three-phase scheme begins on Nov. 1.
“With the transition to a new COVID-19 scheme in November, the expansion in private consumption will contribute to the economic recovery, while the oil tax cut announced earlier today will also help boost consumption,” Hwang said.
The finance ministry said it will temporarily cut down domestic tax on key oil products by a record 20% to reduce pressures from surging oil prices.
(Reporting by Joori Roh; Editing by Sam Holmes)