Economic Outlook: Korea

Roaring ahead to a seven year high...The economy steamed ahead in Q3, according to preliminary data released by the Bank of Korea. Growth came in at 3.6% compared to the same quarter last year, higher than the 2.7% growth recorded for Q2. A jump in exports, coupled with an increase in government spending, propelled the economy in the third quarter. Kicking off Q4, consumer and business confidence were strong in October and November, respectively, and the underlying health of export growth was also strong in October. On 31 October, Korea and China agreed to improve diplomatic relations, which could lead to a recovery in tourism exports next year since they have suffered from the deterioration in relations between the two countries following the deployment of the THAAD missile system in Korea earlier this year. On 7 November, during his visit to Korea, U.S. President Trump called to push ahead with amendment negotiations for the U.S.-Korea free-trade agreement. President Trump’s visit was part of a wider tour of East Asia, in which he pushed for greater regional unity regarding North Korea. The 2018 budget, which includes an increase in spending, and improved diplomatic relations with China should buoy economic growth next year. However, measures to cool the housing market could weigh on the outlook. FocusEconomics panelists expect GDP to expand 2.8% in 2018, which is up 0.1 percentage points from last month’s forecast. In 2019, the economy is forecast to grow 2.7%.  Inflation dropped from 2.1% in September to 1.8% in October. Our panelists project that inflation will average 2.0% in 2018, which is up 0.1 percentage points from last month´s forecast. In 2019, the panel expects inflation to average 2.0% again. Read more at Focus Economics.

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