A rebound in consumer spending following the end of a national health scare over an outbreak of the MERS virus saw South Korea’s economic growth accelerate to a five-year high in the third quarter.
South Korea’s economy expanded 2.6 percent in the July-September quarter from a year earlier, the fastest annual clip in three quarters, the Bank of Korea said Friday, showing a recovery from the Middle Eastern respiratory syndrome crisis that gripped the country in the summer.
“The contribution from consumption is growing, but I can not pinpoint what the trend will be going forward”, Jeon Seung-cheol, who heads the Bank of Korea’s statistics department, told reporters.
Exports, however, contracted 0.2 percent despite the Korean currency’s sharp slide against the USA dollar compared to the first two quarters. Though exports continued to be sluggish, a recovery in domestic demand brought about growth.
The “upward surprise” in third-quarter GDP points to an increased possibility that the BoK will keep its key rate at 1.5 per cent throughout the year, Morgan Stanley wrote in report after the release.
South Korea’s economy picked up pace in the third-quarter. Investment in the construction sector, helped by demand for more buildings and civil building projects, jumped 4.5 percent on-quarter.
Exports, which account for about half of the economy, reduced 0.2 percent in the third quarter from three months earlier after rising 0.3 percent in the second quarter. Facility investment, another key factor in growth, rose 2 percent, quickening from a 0.5 percent rise in the previous quarter.
After the BoK decision this month, Citigroup Inc. pushed back its call for a rate cut until 2016, citing reasons including an improvement in domestic demand. Government consumption grew by 1.9% following a 0.8% increase.
The BOK said that gross domestic income, representing the sum of all income earned while producing goods and services within a nation’s borders, rose 1 percent on-quarter, unchanged from growth reached in the previous quarter, and up 7.1 percent from the year before.
