SEOUL (REUTERS) – South Korea’s financial growth practically halved within the first quarter from the previous three months on Covid-19 curbs and surging inflation, whereas a slowing Chinese financial system clouded the outlook for the approaching months.
Gross home product grew a seasonally adjusted 0.7 per cent within the first quarter from the final quarter of 2021, preliminary knowledge from the Bank of Korea (BOK) confirmed on Tuesday (April 26), slowing from 1.2 per cent 1 / 4 earlier, however simply beating 0.6 per cent growth seen in a Reuters survey.
“Domestic consumption will rebound as domestic Covid-19 curbs were mostly lifted, but China’s slowdown will severely hit exports and the overall economy in the current quarter,” mentioned HI Investment & Securities economist Park Sang-hyun.
The knowledge comes as a senior International Monetary Fund (IMF) official warned on Tuesday that Asia faces a “stagflationary” outlook, with probably downgrades to growth projections and surging worth pressures.
Private consumption shrank 0.5 per cent, the worst contraction in 5 quarters, as the federal government enforced social distancing restrictions to curb a surge in Omicron coronavirus circumstances.
Capital funding fell 4 per cent, the quickest decline in three years, whereas building funding misplaced 2.4 per cent.
From a yr earlier, the financial system grew 3.1 per cent, in contrast with economists’ forecast for two.8 per cent growth.
The BOK is predicted to revise down this yr’s growth forecast from the present 3 per cent estimate in its subsequent overview in May, as the nation faces headwinds from the Ukraine struggle, United States financial coverage tightening and Covid-19 lockdowns in China.
New BOK governor Rhee Chang-yong mentioned final week that financial growth was anticipated to weaken farther from earlier projections and that financial coverage would wish to deal with risks to growth and the threats from inflation.
In a separate Reuters ballot, South Korea’s financial system was forecast to develop 2.8 per cent this yr and a pair of.6 per cent in 2023 after increasing at an 11-year excessive of 4 per cent in 2021.
The BOK this month raised its benchmark price to 1.5 per cent, the very best since August 2019, in a shock transfer as it ramped up the struggle in opposition to inflation.
The IMF just lately lowered its 2022 growth projection for the nation to 2.5 per cent from 3 per cent, whereas upgrading its inflation projections to 4 per cent from 3.1 per cent.