South Korea GDP growth seen slowing last quarter as factory output slipped

FAN Editor
The city skyline of Incheon is pictured early morning in an aerial view south of Seoul, South Korea
The city skyline of Incheon is pictured early morning in an aerial view south of Seoul, South Korea, January 21, 2018. REUTERS/ Fabrizio Bensch

January 24, 2018

By Dahee Kim and Cynthia Kim

SEOUL (Reuters) – South Korea’s economic growth is expected to have slowed significantly in the fourth quarter as October’s national holiday weighed on factory output.

A Reuters survey of 10 economists found the economy was expected to have grown just 0.1 percent in the October-December period from a quarter earlier, a big step down from the third quarter’s 1.5 percent rise.

The same poll found that gross domestic product growth was seen expanding 3.1 percent in the fourth quarter from a year earlier, also slowing down from 3.8 percent growth in September quarter.

“Weaker factory output due to the long Chuseok holiday (in October) seems to have pressured overall economic growth,” said Lee Sang-jae, an economist at Eugene Investment & Securities.

“Domestic consumption will continue its recovery, but tougher housing rules would have had a negative impact on capital and construction investment in the last three months,” added Lee.

Factory output barely rebounded in November after contracting in holiday-shortened October at the sharpest rate since 2013.

South Korea said in October that it would impose mortgage curbs on owners of multiple homes to put a brake on binge borrowing, starting this year.

Poll respondents noted that robust exports, which have risen for 14 straight months, kept year-on-year growth at around 3 percent.

South Korea’s exports surged 8.9 percent in December, lifting 2017 shipments to the highest on record in value terms, thanks to soaring global demand for memory chips and petrochemicals.

At its January policy meeting the Bank of Korea upgraded its growth outlook to 3 percent from the 2.9 percent forecast in October, citing improving private consumption.

The BOK kept interest rates unchanged at its meeting last Thursday after raising them in November for the first time in more than six years.

(Reporting by Dahee Kim and Cynthia Kim; Additional reporting by Yuna Park and Haejin Choi; Editing by Eric Meijer)

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