South Korea’s economy likely skirted close to a recession at the start of the year, according to a Bloomberg survey, as slower global growth stunted exports and renewed currency weakness helped inflate the country’s import bill.
(Bloomberg) — South Korea’s economy likely skirted close to a recession at the start of the year, according to a Bloomberg survey, as slower global growth stunted exports and renewed currency weakness helped inflate the country’s import bill.
Economists revised down growth expectations for the first quarter from the prior three-month period to just 0.1%, according to the median of 14 responses in a Bloomberg monthly survey.
That’s down from a 0.3% forecast in the previous survey and would follow a contraction in the final three months of last year. Two back-to-back quarters of economic contraction is typically seen as a technical recession.
“In the first quarter — particularly in March — we saw weakening demand from the US and EU in addition to China, so everywhere demand is slowing,” said Jeong Woo Park, an economist at Nomura Holdings Inc. Park sees the economy contracting 0.7% from the fourth quarter, the weakest forecast among peers. “I think Korea is already in a recession,” he added.
The forecasts come ahead of the country’s first quarter gross domestic product data, set to be released next week. South Korea’s economy faces significant headwinds, including a shaky local housing market, credit risks and the decline in exports. Meanwhile, the currency has been a laggard in Asia.
Concerns over the strength of the economy have already contributed to the Bank of Korea keeping interest rates on hold since its January meeting. While the consensus is still for the economy to expand in the first quarter and to regain momentum after that, a weaker-than-expected outcome could further cement the view that the BOK’s tightening cycle is over.
The drop in analyst expectations for the three-month period ended March was led by the increase in imports, which in GDP calculations take away from growth figures. Exports have plummeted this year amid weaker global demand for goods ranging from chips to refined oil. The Asian nation relies heavily on trade to fuel economic growth, and also acts as a barometer for global growth because of its range of exported goods.
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