South Korea Q1 GDP growth beats all estimates, puts policy easing in doubt

By Thomson Reuters Apr 24, 2024 | 6:15 PM

By Cynthia Kim and Jihoon Lee

SEOUL (Reuters) -The South Korean economy grew at the fastest pace in more than two years in the first quarter on robust exports, beating all estimates and fuelling market expectations that the Bank of Korea would delay cutting interest rates.

Gross domestic product (GDP) for the January-March quarter was 1.3% higher than the preceding three months on a seasonally adjusted basis, the sharpest expansion since the fourth quarter of 2021, data from the Bank of Korea (BOK) showed.

That comes after an expansion of 0.6% in the prior quarter and compares with a median forecast of 0.6% in a Reuters survey of economists.

On an annual basis, Asia’s fourth-largest economy grew 3.4%, compared with a gain of 2.2% in the fourth quarter of 2023 and an increase of 2.4% expected by economists.

Exports expanded 0.9% from three months earlier, while private consumption climbed 0.8%.

Facility investment fell 0.8% and construction investment rose 2.7%. Government spending was 0.7% higher.

Exports of the trade-reliant economy grew for a sixth consecutive month in March, driven by robust demand for South Korean chips.

However, domestic consumer spending has been weak with interest rates having stayed at high levels for a prolonged period, raising concerns about uneven economic recovery.

The BOK said earlier this month greater uncertainty on the inflation outlook and the strength of exports argued against a near term push to cut interest rates, as the central bank left the policy rate steady at a 15-year high.

The central bank also said at their last rate decision meeting that there was a possibility of the economy growing in 2024 at a faster pace than its earlier projection of 2.1%. In 2023, the economy grew by a three-year low of 1.4%.

(Reporting by Jihoon Lee, Cynthia Kim; Editing by Himani Sarkar and Sonali Paul)