South Korea: Growth momentum picked up pace in Q2 2022 – UOB

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

Key Takeaways

“South Korea’s GDP rose sequentially for the 8th consecutive quarter with the momentum picking up to 0.7% q/q from 0.6% in 1Q22 as stronger private consumption and government expenditure offset weaker exports and facilities investment.”

“Export and investment could continue to underperform in 2H22 due to factors including weaker global growth, elevated energy prices and accelerated rate hikes to temper runaway inflation. The Bank of Korea (BoK) is expected to continue raising its interest rate for the rest of this year.”

“As such, the strong consumption recovery in 2Q22 could be short-lived with COVID resurgence risks also adding to the growth headwinds. Government spending may also moderate as the new administration plans a tightening in fiscal rules.”

“South Korea’s economy expanded by 2.9% y/y in 1H22. Taking into consideration of the stronger than expected 2Q22 GDP and increased downside risks, we are maintaining our full-year GDP growth forecast for South Korea at 2.7%, with an expected slowdown to 2.8% y/y in 3Q and 2.1% in 4Q.”