SEOUL (Reuters) – South Korea’s economy likely grew at a faster pace in the second quarter on an annual basis, posting its fastest year-on-year growth in a decade, as export demand and investments continued to support Asia’s fourth largest economy.
While quarterly growth is seen slowing from a solid rise in the first three months of the year, according to a Reuters poll, the economy is expected to have posted the biggest year-on-year growth since the fourth quarter of 2010.
Gross domestic product (GDP) likely expanded 6.0% from a year ago in the second quarter, according to a median forecast of 20 economists in the poll, up sharply from 1.9% growth in the first quarter.
While analysts say the introduction of tough coronavirus restrictions in mid-July likely hit third-quarter growth, economists in a separate Reuters poll still expected South Korea to post the fastest full-year growth this year in over a decade.
“Improvement in private consumption on relaxed coronavirus-related distancing measures and continued growth in exports would have led the second-quarter growth,” said Ha Keon-hyeong, an economist at Shinhan Investment Corp.
GDP likely expanded by a seasonally adjusted 0.7% in the second quarter, slowing from a 1.7% rise in the preceding quarter, according to the Reuters poll.
Annual second quarter growth was underpinned by a strong rise in exports, buoyed by robust demand for chips, cars and petroleum products.
Exports grew 42.1% in the second quarter – at their fastest pace in 44 years – from a pandemic-induced slump in the same period of 2020, trade ministry data showed earlier this month.
Economists worry that the country’s worst-ever COVID-19 outbreak and a semi-lockdown in some major cities may put a brake on the recovery going forward.
South Korea imposed the toughest coronavirus restrictions in the Seoul metropolitan area in mid-July, but that did little to contain a record rise in daily infections. Just over 13% of the 52 million population have been fully vaccinated.
“The key is the third quarter. With tougher distancing measures spreading across the country as the fourth wave of coronavirus materialises, recovery in private consumption would probably be delayed,” said Lee Seung-hoon, chief economist at Meritz Securities.
Despite this, economists generally still expect over 4% growth in 2021, thanks to strong exports and investments, and as the government’s extra fiscal stimulus helps cushion the negative impact from the latest outbreak.
Twenty-six economists forecast the economy will grow 4.2% this year, a separate Reuters poll showed, rebounding from a 0.9% contraction in 2020. That would be the fastest full-year growth since 2010.
($1 = 1,148.8700 won)
(Reporting by Joori Roh; Editing by Ana Nicolaci da Costa)