ANN/KOREA HERALD – South Korea’s gross domestic product (GDP) – the value of all goods and services produced – improved slightly in the second quarter but underperformed that of most Organization for Economic Cooperation and Development (OECD) countries on the United States (US) and China slowdowns, the latest Bank of Korea (BOK) data showed on Monday.
The central bank found that the GDP rose 0.7 per cent on-quarter in the April-June quarter, an incremental improvement from the 0.6 per cent in the previous quarter. The latest growth rate ranks 20th among 35 countries – including the 33 member states in the OECD and two non-members, China and Indonesia.
A trade-reliant economy, Korea has borne the brunt of contractions in the US and Chinese economies, Korea’s two largest trading partners. The GDP fell 0.1 per cent in the US and 2.3 per cent in China in the same period.
The BOK said consumer spending propped up growth for the first six months of the year but the momentum is rapidly losing steam, given the shrinking exports and investment. Concerns over a global economic slowdown are sapping optimism, it noted.
In July, the International Monetary Fund slashed its global growth forecast for 2022 to 3.2 per cent, from 3.6 per cent issued in April, saying downside risks from inflation and the war in Ukraine could push the world economy to a brink of recession, if the uncertainties are left unchecked.

For Korea, private consumption – the reason economic output accelerated in the January-June period – would not be as reliable and effective to support growth in the remaining months to come, the BOK said, referring to rising borrowing costs.
The bank, which backed its single biggest hike of 50 basis points in July, set the policy rate at 2.5 per cent in August after the usual hike half the July raise, and is expected to back two more such raises until November to corral inflation.
Adding to the woes is a five-month trade deficit since April. The BOK has acknowledged that the economy would have to deal with the trend for the next three months at least. The January-August deficit of USD24.7 billion has already surpassed the yearly high set in 1996, and the estimated August deficit of USD9.47 billion was a monthly record high since 1956 when the government began tracking the data. Higher bills for energy and petroleum imports were blamed.
The August estimate was a serious blow to Asia’s fourth-largest economy, because it could lead to a current account deficit that same month, according to the central bank. The current account balance snapped a 23-month surplus in April but swung back into the black in May.
The balance has since seen a surplus.
“We’ll have to manage our expectation for the August goods balance. We will have to look at other accounts, but it is possible (to see a deficit),” a senior Bank of Korea official said yesterday discussing the advanced estimate.
According to the data, for the first time in nearly a decade, Korea posted a deficit in its goods balance on soaring energy import bills in July, with the current account surplus dropping sharply from the same month a year earlier.