Vivek Maishra

BENGALURU, (Reuters) – South Korea’s third quarter economic growth was likely to slow down as strong exports were partly offset by weaker domestic demand due the widespread Delta coronavirus variant. A Reuters poll revealed this.

According to 12 analysts’ median predictions, Asia’s fourth largest economy will expand by 0.6% seasonally in the third quarter, compared to the three-month prior. This is after it grew 0.8% in April and June.

Year-on year, the gross domestic product (GDP), likely increased 4.2%. That is down from the 6.0% rate in the second-quarter, which was one of the highest rates for 10 years. On Oct. 26, the data will be available.

Chun Kyuyeon from Hana Financial Investment, Seoul, stated that domestic exports and facility investments continued to help growth while private consumption was somewhat sluggish during the third quarter because of the respread COVID-19.

“Although global supply disruptions are slowing and risk related to China’s economy continue, consumption is projected to rise thanks to government policy support.

However, South Korean economic activity is set to slow down next year because of waning panademic-related stimuli and China’s economic slowdown. China is South Korea’s biggest trade and investment partner.

It is very worrying to see what’s happening in China. This is clearly a major downside risk. Although the preliminary risk seems to be low, we will have to watch and wait,” Stephen Lee from Meritz Securities Seoul said.

The average growth rate is 4.0% for this year. That’s a big rebound from the 1.0% contraction last year. It was also the first recession in more than two decades according to a separate Reuters poll. However, growth is expected to slow to 3.0% next and 2.6% by 2023.

Exports to South Korea grew by 36.1% in October compared with a year ago. The period saw an increase in exports to China and the United States, as well as 42.1% and 37.1% respectively.

These trade data will be closely monitored by the Bank of Korea in advance of an expected increase to 1.0% at its next meeting, Nov. 25,

Alex Holmes from Capital Economics, Singapore, said that “the strength of the outside sector adds weight back to our view, the economy will expand quicker, and the central banks will tighten faster.”