South Korean economy in worst quarterly performance since 2008

South Korean exports fell by 5.4 percent in the fourth quarter after leaping 6.1 percent a quarter earlier. (Reuters)
Updated 25 January 2018
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South Korean economy in worst quarterly performance since 2008

SEOUL: South Korea’s economy unexpectedly shrank in the last quarter as struggling car exporters and industrial production failed to keep up the previous quarter’s dashing pace, posting its worst performance since 2008.
An 10-day Chuseok autumn holiday in October hit fourth-quarter industrial output, just as a slump in car exports erased the gains from booming overseas sales of computer memory chips.
Hyundai Motor and its Kia Motors affiliate said earlier this month 2017 shipments were a million vehicles below their 8.25 million target after struggling with competitiveness problems and trade issues.
The Bank of Korea said on Thursday that gross domestic product fell by a seasonally adjusted 0.2 percent in the fourth quarter, sliding from bumper growth of 1.5 percent in the third quarter, which was the fastest expansion in seven years.
“There is a strong base effect after particularly high third quarter growth and as irregular factors such as the Chuseok holiday shortened the number of working days for businesses,” said Chung Kyu-il, director general at the bank’s Economic Statistics Department said at a news conference.
Thursday’s data reinforced a broad consensus that the central bank’s monetary tightening will be gradual this year as export- and investment-led growth moderates after rapid expansion in 2017.
The contraction in fourth-quarter 2017 undershot the 0.1 percent expansion seen by economists and marks the worst quarterly performance since the economy contracted by 3.3 percent on-quarter in the fourth quarter of 2008.
Exports fell by 5.4 percent in the fourth quarter after leaping 6.1 percent a quarter earlier, while private consumption growth accelerated to 1.0 percent from 0.8 percent, the BOK said in a statement.
The economy expanded 3.0 percent from a year earlier, slowing from 3.8 percent growth in the September quarter.
Chung added that on a half-year basis, the July-December period showed faster growth versus January-June 2017, indicating an overall improvement in growth momentum.
Moon Jung-hui, an economist at KB Investment & Securities said domestic demand will make up for slowing exports growth this year.
“The burst of investment and exports we’ve seen in 2017 won’t be sustained this year and will slow down. As the GDP data shows, the good news is that private consumption is picking up, and will support growth this year,” said Moon.
Construction investment fell 3.8 percent from a quarter earlier after the government said in October it would impose additional mortgage curbs on owners of multiple homes to discourage excessive borrowing.
The bank is monitoring the effects of its November hike, the first tightening in six years, and remains wary of triggering disruptive capital flows.
The BOK held its policy interest rate unchanged at 1.50 percent on Jan. 18 and upgraded its 2018 growth forecast to 3 percent, a fraction higher than the 2.9 percent projected in October last year.
It lowered its 2018 consumer inflation forecast to 1.7 percent from 1.8 percent, supporting analysts’ views that monetary policy will remain accommodative in 2018.


Singapore woes ring trade alarm bells

Singapore has long been viewed as a barometer of the global demand for goods and services. (AFP)
Updated 22 July 2019
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Singapore woes ring trade alarm bells

  • Governments have slashed economic growth forecasts, and gauges in several countries measuring activity in the manufacturing and services sectors paint a bleak picture

SINGAPORE: A plunge in exports and the worst growth rates for a decade have fueled concerns about the outlook for Singapore’s economy, with analysts saying the figures offer a warning that Asia is heading for a slowdown as China-US tensions bite.
While it may be one of the smallest countries in the world, the export hub is highly sensitive to external shocks and has long been viewed as a barometer of the global demand for goods and services.
The affluent city-state is highly dependent on trade and has traditionally been one of the first places in Asia to be hit during global downturns — with ripples typically spreading out across the region. The latest signs are not good. In June, exports collapsed 17.3 percent from a year earlier, the fastest decline in more than six years, led by a fall in shipments of computer chips.
That followed a shock 3.4 percent quarter-on-quarter contraction in GDP in the second quarter. Year-on-year growth came in at just 0.1 percent, the slowest pace since 2009 during the global financial crisis.
“Singapore is the canary in the coal mine,” Song Seng Wun, a regional economist with CIMB Private Banking, told AFP. “And what it tells us is that it is a tough environment.”
To warn of danger, miners used to bring caged canaries underground with them as the birds would die in the presence of even a small amount of poisonous gas — signaling to workers that they should make a swift exit.

BACKGROUND

In June, exports in Singapore collapsed 17.3 percent from a year earlier, the fastest decline in more than six years, led by a fall in shipments of computer chips.

While steadily weakening growth in China is partly to blame for a slowdown in exports, analysts say the trade war between the US and China has dramatically worsened the situation.
While Singapore — a transit point for products heading to and from Western markets as well as the Asian base for manufacturers of some hi-tech goods — may be showing the strain most, negative data has emerged throughout the region.
Exports have been slipping across Asia. In India they plummeted 9.7 percent in June, in Indonesia, Southeast Asia’s biggest economy, they dropped 8.9 percent in the same month while in South Korea they slipped 10.7 percent in May.
Governments have slashed economic growth forecasts, and gauges in several countries measuring activity in the manufacturing and services sectors paint a bleak picture.
Central banks are moving to spur domestic consumption, with Indonesia and South Korea cutting interest rates Thursday, the latest in Asia to lower borrowing costs.
Singapore’s central bank is seen as likely to ease monetary policy at an October meeting, and some economists are predicting the country could fall into recession next year.
“There are no winners in this trade war. While most of the attention has focused on the trade conflict between China and the US, the damage has not been confined to these two economies,” business consultancy IHS Markit said in a commentary.