[ad_1]
The South Korean economy is projected to have returned to growth in the third quarter after a slight contraction in the previous quarter, driven by strong exports that offset weakening domestic demand due to higher borrowing costs. Economists forecast a seasonally adjusted 0.5% growth for the quarter, following a 0.2% contraction in the April-June period. On an annual basis, the economy is expected to have expanded by 2.0% in the third quarter, slightly lower than the 2.3% growth seen in the previous quarter.

While exports have remained robust, domestic demand has been sluggish, as indicated by various high-frequency indicators like retail sales and construction activity. Monthly exports have seen a growth of nearly 10% on average this year until September, driven largely by semiconductor demand from the United States. Despite this, the pace of export growth has slowed in recent months due to moderation in trade with major partners like China, Japan, and India.

High borrowing costs have been dampening domestic consumption in South Korea, where household debt levels are among the highest in the developed world. In an effort to stimulate demand, the Bank of Korea recently cut its policy rate by 25 basis points from a 15-year high of 3.50%. However, further rate cuts are not expected in the near term, with the BOK likely to maintain its current stance for the rest of the year and only reduce rates by 50 basis points next year.

The overall economic growth forecast for South Korea for this year stands at 2.4%, in line with the Central bank‘s revised projections, amid uncertainties surrounding the recovery in China and weakening demand from the U.S.

[ad_2]
SOURCE