South Korea: Time for action

3 min
Mahamoud Islam
Mahamoud Islam Senior Economist for Asia

Economic activity rose by +0.6% q/q in Q3 of 2018 (a pace similar to Q2). Consumption was the main driver, with a solid growth (+0.8% q/q) driven by an acceleration of both government and private consumption. Investment contracted sharply (-4.5% q/q). External trade contribution to growth was positive, with a solid export performance (+3.9% q/q). A fiscal stimulus package consisting of social welfare measures and the creation of public sector jobs helped to keep consumption in-check. Private investment is being hindered by measures to curb housing prices, rising uncertainties around trade and an increase in minimum wages. In that context, it is likely that the central bank will put the tightening cycle on hold, and fiscal support would increase. The government has already announced a +9.7% increase in expenditure in 2019. Economic growth is set to rise by +2.8% in 2018 and +2.7% in 2019.