South Korea: GDP finally sees the light at the end of the tunnel – UOB

Economist at UOB Group Ho Woei Chen, CFA, reviews the latest GDP figures in South Korea.

Key Quotes

“South Korea’s 1Q21 GDP beat expectations at 1.8% y/y, 1.6% q/q seasonally-adjusted (Bloomberg and UOB est: 1.2% y/y, 1.1% s/a q/q). This is the first year-on-year growth after three preceding quarters of contraction. Recovery was broad-based with growth registered in private consumption, gross fixed capital formation, government spending as well as goods exports and imports in the quarter.”

“On a q/q seasonally-adjusted basis, GDP expanded at a faster pace of 1.6% in 1Q21 from 1.2% in 4Q20. The growth momentum was positive for all major GDP components.”

“The economic recovery is looking more sustainable with the broadening of growth drivers and improvement in the jobs market.”

“Taking into consideration that 1Q21 GDP was stronger than our forecast as well as positive signs of recovery in private consumption, we will upgrade our 2021 full-year growth forecast for South Korea to 3.7% from previous 3.3%, which factors in growth of 5.7% y/y in 2Q21 and 3.8% y/y in 2H21. The key downside risk will come from a resurgence in domestic COVID-19 infections given a recent increase in caseloads while the vaccination program has seen setbacks owing to concerns about the side effects. A fresh wave of outbreak will likely delay private consumption recovery even as external demand continues to rebound. This will then warrant a reassessment of South Korea’s growth outlook.”