S.Korea Q1 GDP growth slows, China risks cloud outlook

© Reuters. FILE PHOTO: A truck driver stands subsequent to his truck as he gets ready to transport a transport container at Pusan Newport Terminal in Busan, South Korea, July 1, 2021. REUTERS/Kim Hong-Ji

By Jihoon Lee

SEOUL (Reuters) -South Korea’s economic growth nearly halved in the first quarter from the preceding three months on coronavirus curbs and surging inflation, while a slowing Chinese economic system clouded the outlook for the coming months.

Outrageous domestic product grew a seasonally-adjusted 0.7% in the first quarter from the closing quarter of 2021, preliminary data from the Bank of Korea (BOK) confirmed on Tuesday, slowing from 1.2% a quarter earlier, but honest beating 0.6% growth seen in a Reuters gaze.

“Home consumption will rebound as domestic COVID-19 curbs had been largely lifted, but China’s slowdown would severely hit exports and the total economic system in the latest quarter,” acknowledged Park Sang-hyun, economist at HI Investment & Securities.

South Korean stocks and the won currency opened with modest features after the data.

The info comes as a senior Global Monetary Fund (IMF) reliable warned on Tuesday Asia faces a “stagflationary” outlook with likely downgrades to growth projections and surging label pressures.

Non-public consumption shrank 0.5%, the worst contraction in five quarters, because the authorities enforced social distancing restrictions to curb a surge in Omicron coronavirus circumstances.

Capital investment fell 4%, the quickest decline in three years, while construction investment misplaced 2.4%.

From a yr earlier, the economic system grew 3.1%, compared with economists’ forecast for 2.8% growth.

The BOK is anticipated to revise down this yr’s growth forecast from the latest 3% estimate in its subsequent overview in Can also, because the nation faces headwinds from the Ukraine battle, U.S. monetary coverage tightening and COVID-19 lockdowns in China.

New BOK governor Rhee Chang-yong acknowledged closing week economic growth is anticipated to weaken extra from earlier projections and that monetary coverage would want to handle risks to growth and the threats from inflation.

In a separate Reuters poll, South Korea’s economic system used to be forecast to grow 2.8% this yr and 2.6% in 2023 after increasing at an 11-yr excessive of 4% in 2021.

The BOK this month raised its benchmark payment to 1.50%, the very ideal since August 2019 in a surprise pass as it ramped up the fight in opposition to inflation.

The IMF no longer too lengthy previously lowered its 2022 growth projection for the nation to 2.5% from 3.0% while upgrading its inflation projections to 4.0% from 3.1%.