2017.04.2818:51:00UTC+00South Korea’s Economy to Grow 2.6 Pct in 2017 on Solid Exports and Likely Extra Fiscal Spending in H2

The South Korean economic growth accelerated in the first quarter to 0.9 percent sequentially, according to the preliminary estimate. On a year-on-year basis, it grew 2.7 percent. Investment mainly drove the rebound in the economic growth. Investment contributed 1.2 percentage points to the headline quarter-on-quarter growth. Meanwhile, construction and facilities investment contributed 0.8 percentage points and 0.4 percentage points to the economic growth.

However, private consumption continued to be a drag on the growth, rebounding just 0.4 percent. This is partially due to low consumer sentiment that weighed on consumption of services and non-durable goods.

Construction activity is expected to start moderating from the fourth quarter of 2017, noted Barclays in a research report. The South Korean economy is expected to grow 2.6 percent in the whole of 2017 with the help of extended outperformance by exports and the probability of additional fiscal spending in the second half of 2017, stated Barclays. Exports are expected to expand 15 percent year-on-year, with the launches of the Samsung Galaxy S8 and iPhone 8 underpinning the near-term outlook.

This might counter the drag from slower tourism cause by China’s response to the THAAD anti-missile system deployment and increased geopolitical tensions. Even if the solid first quarter GDP outturn might cut the requirement for large fiscal stimulus package, the presidential election candidates are expected to propose stimulus packages, added Barclays.