Central bank argues that economy rebounds
The Bank of Korea (BOK) recently comes up with a rosy view on the Korean economy, which suffered the worst setback in a decade during the first quarter of this year.
The central bank said that Asia’s fourth-largest economy bounces back thanks to the growth of private consumption and recovery of semiconductor export.
“The Korean economy has picked up somewhat following a growth setback in the first quarter. Private consumption maintained its sustained growth, albeit at a moderate pace, while investment in construction and facilities remained weak,” it said.
“The export of semiconductors has expanded in recent months on a volume basis, although the overall pace of export growth remained tepid. Looking ahead, Korea’s economy is expected to grow along the path broadly consistent with the one projected in April.”
During the first three months of 2019, gross domestic product (GDP) declined 0.3 percent compared to the previous quarter.
It marked the worst contraction since a 3.3-percent decrease in late 2008 when the country was hit by the global financial crisis and the resultant credit crunch.
In particular, a sharp downturn in the semiconductor sector weighed on Korea Inc., which heavily relies on the chip industry. The nation is home to the world’s two leading memory chip makers of Samsung Electronics and SK hynix.
However, the BOK failed to be 100 percent sure about the rebound of the export-driven economy because of the protracted trade war between the world’s two economic powers of the United States and China.
“The deepening of U.S.-China trade conflict has heightened uncertainties surrounding the growth outlook. Among the upside risks to the growth outlook is an easing of uncertainties from a possible agreement on the trade deal between the U.S. and China,” it said.
“The downside risks include a spread of global trade disputes and a delayed recovery of global demand for semiconductors.”
With regard to the consumer price, the BOK expected that it would remain stable for the time being.
“Consumer price inflation is expected to remain below 1 percent for some time, before gradually rising to the lower- to mid-1 percent level in the second half of this year,” it said.
“The current account balance is forecast to stay in positive territory.”