**South Korea Q3 Growth Stumbles, Exports Drag**

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Post on Oct 24, 2024

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South Korea's Q3 Growth Stumbles, Exports Drag

South Korea's economy expanded at a slower pace in the third quarter, as a slump in exports weighed heavily on growth. The Bank of Korea (BOK) reported that the country's gross domestic product (GDP) rose by 0.3% quarter-on-quarter (QoQ) in the July-September period, a significant slowdown from the revised 0.7% growth in the previous quarter. This sluggish performance highlights the challenges facing the Korean economy amidst a global slowdown and persistent trade tensions.

Exports Take a Hit

The primary culprit behind the weakened growth was the sharp decline in exports, which contracted by 5.7% QoQ in the third quarter. This marked the third consecutive quarterly contraction in exports, underscoring the fragility of the global trade environment. Declining demand from major trading partners, such as China and the United States, coupled with rising trade protectionism, has put pressure on Korean businesses.

Domestic Consumption Remains Resilient

Despite the export woes, domestic consumption remained relatively resilient, expanding by 0.6% QoQ in the third quarter. This growth was supported by a steady increase in household spending, driven by low interest rates and a strong labor market. However, the impact of the export slowdown on businesses and employment remains a concern for the future.

Outlook Remains Uncertain

The BOK's latest GDP figures have raised concerns about the sustainability of South Korea's economic growth. The central bank has lowered its 2023 growth forecast to 1.7%, reflecting the weakening global outlook and the ongoing challenges facing the export sector. The Bank also emphasized the need for continued fiscal and monetary policy support to counter the headwinds facing the economy.

Factors to Watch

• Global Economic Outlook: The global economic outlook remains uncertain, with rising inflation and interest rates posing risks to global demand.
• Trade Tensions: The ongoing trade disputes between major economies, including the United States and China, continue to create volatility in global trade flows.
• Domestic Demand: The resilience of domestic consumption will be a key factor in determining the pace of economic growth in the coming quarters.

The South Korean economy faces a complex set of challenges in the coming months. While domestic demand provides a buffer against external shocks, the weakness in the export sector remains a significant concern. The government and the central bank will need to closely monitor economic developments and implement appropriate policy measures to support sustainable growth.