The Korean economy grew by 1.1 percent in the second quarter of 2019 compared to three
months earlier, indicating a turnaround from the 0.4 percent contraction in the first quarter. It was the fastest pace of growth in seven quarters since the third quarter of 2017 when the economy had expanded by 1.5 percent. The growth, however, was driven mostly by an increase in government spending, which offset weak exports and private consumption.
The second quarter saw fiscal spending increase by 2.5 percent quarter on quarter and by 7.3 percent year on year, with healthcare spending leading the way. Government spending contributed 1.3 percentage points to GDP growth in the April-June period compared to minus 0.6 percentage points in the previous three-month period.
Private consumption rose by 0.7 percent, backed by an increase in spending on semi-durable goods and medical services. Consumer spending showed a sign of recovery, but still remained largely weak.
Construction investment grew by 1.4 percent on the back of civil works, while equipment investment expanded by 2.4 percent thanks to a growth in investment spending on transportation equipment.
The growth rate of exports rebounded to 2.3 percent in the second quarter from negative 3.2 percent in the first quarter as there was a rise in outbound shipments of automobiles and semiconductors.
Imports also expanded by 3 percent due to a growth in machinery imports, representing a sharp turnaround from the previous quarter’s minus 3.4 percent.
As it moved into the second half of the year, the Korean economy is faced with a set of challenges that dim its outlook. Among others, several major issues are expected to have significant implications for the economy as below: