South Korea: GDP surprised to the upside in Q3 – UOB

Economist at UOB Group Ho Woei Chen reviews the recently published GDP figures in South Korea.

Key Takeaways

“South Korea’s advance GDP for 3Q22 outperformed market’s expectations at 3.1% y/y and picked up pace from 2.9% in 2Q22. On a seasonally-adjusted q/q basis, GDP expanded by 0.3% in 3Q22 compared to 0.7% in 2Q22, in line with Bloomberg’s consensus forecast. This is the 9th straight quarter of sequential growth. All the major expenditure components registered positive growth momentum.”

“Factoring in the stronger-than-expected 3Q22 GDP, South Korea’s full-year 2022 growth could be marginally better than our forecast of 2.7%. Assuming GDP growth moderates to 2.2% y/y in 4Q22, the full-year growth will be around 2.8%. We retain our forecast for the economy to ease more evidently to 1.7% in 2023 due to the multitude of downside risks. We will review our estimates following the release of the final 3Q22 GDP data on 1 Dec.”

“As for the monetary policy, our ‘terminal rate’ forecast remains at 3.50% as guided by the BoK in the Oct monetary policy meeting. A 50bps rate hike to 3.50% in Nov remains on the table for now as we think that the central bank may see merits to frontload its rate hikes given the high domestic inflation. The BoK made it clear that US Fed rate trajectory does hold some sway over its rate decision due to the impact on the currency market. Ahead of the 24 Nov rate meeting, South Korea’s Oct CPI data on 02 Nov and 01/02 Nov FOMC as well as sentiment towards the KRW could potentially affect the outcome.”