Korea’s economy contracts 0.2 pct in Q2, matching earlier estimate: BOK

South Korea’s economy retreated in the second quarter of the year amid weaker domestic demand, while exports remained solid, central bank data showed Thursday.

The country’s real gross domestic product — a key measure of economic growth — contracted 0.2 percent on-quarter in the April-June period, matching an earlier estimate, according to preliminary data from the Bank of Korea (BOK).

The second-quarter figure compares with the 1.3 percent on-quarter expansion in the January-March period, which marked the highest since the fourth quarter in 2021, when the economy expanded 1.4 percent.

On a yearly basis, South Korea’s economy advanced 2.3 percent in the second quarter, slowing from 3.3 percent growth for the first quarter of the year.

The central bank expects the country’s economy to meet its growth outlook given a recovery trend.

In the first half, the economy expanded 2.8 percent on a yearly basis. Exports will continue their upward trend down the road, and household income will improve as well.

For the year, the bank expects the economy to rebound slightly, at 2.4 percent, slower than its earlier estimate of 2.5 percent.

The contraction was somewhat widely expected due to a base effect the previous quarter.

Private spending contracted 0.2 percent on-quarter in the April-June period, compared with a 1.3 percent advance the previous quarter, the central bank said.

The country’s exports climbed 1.2 percent in the second quarter, slowing from the previous quarter’s 1.8 percent gain, while imports rose 1.6 percent, shifting from a 0.4 percent dip the previous quarter.

Government spending increased 0.6 percent, and construction investment went down 1.7 percent in the second quarter, a shift from the previous quarter’s 3.3 percent gain, according to the data.

Last month, the central bank held its key interest rate steady at 3.5 percent for the 12th straight time amid moderating inflation and high household debt.

The rate freezes came after the BOK delivered seven consecutive rate hikes from April 2022 to January 2023.

South Korea’s economic growth slowed to the lowest in three years last year due to a slump in exports amid tightening monetary policies around the globe.

The economy expanded 1.4 percent last year, slowing from a 2.6 percent advance in 2022 and 4.3 percent growth in 2021.

The 2023 expansion marks the lowest since a 0.7 percent contraction in 2020 during the coronavirus pandemic.

For the year, the bank expects the economy to rebound slightly, at 2.4 percent, slower than its earlier estimate of 2.5 percent.