South Korea’s economy slowed in the first quarter as sluggishness in exports weighed on corporate investment and consumers cut back on spending.
GDP rose 0.4 percent from the fourth quarter of last year, the Bank of Korea said yesterday.
The pace of economic growth slowed even as the government front-loaded fiscal spending and resumed consumption tax discounts on cars.
The central bank cut its GDP forecast for this year to 2.8 percent on April 19, citing weakness in the first three months of the year.
The economy should be on the road to gradual improvement this quarter, Bank of Korea Governor Lee Ju-yeol said.
“South Korea’s growth is closely related with exports volume, which slumped earlier this year, also weighing on corporate investment,” NH Investment & Securities Co Seoul-based economist An Ki-tae said. “The decline in consumption looks mainly due to the base effect of spending gains in the previous quarter.”
Facilities investment fell 5.9 percent from the previous quarter, according to yesterday’s data, while exports dropped 1.7 percent. Private consumption decreased 0.3 percent. Government spending was up 1.3 percent and construction investment grew 5.9 percent.
Facilities investment fell in the machinery and transportation equipment sectors and slower investment might weigh on future production, Bank of Korea general director Jeon Seung-cheol said.
Consumption declined as the government suspended consumption-tax discounts earlier this year before resuming them in February, and there was also a base effect from spending gains in the fourth quarter of last year, he said, adding that consumption is showing recovery from last month because of new products released in the automobile and mobile-phone sectors.
South Korea’s exports have fallen for 15 consecutive months and are poised to decline again this month, based on April 1 to Wednesday last week figures released by the customs office. However, policymakers have started to point to some positive signals for the economy, such as an improvement in factory output data.
South Korean Minister of Finance Yoo Il-ho said in an earlier interview that South Korea has room to lower borrowing costs and issue more debt if such expansionary policies are needed to help the economy achieve its 3.1 percent growth target.
Economists are almost evenly split over the odds for a rate cut this year, with 12 of 23 surveyed by Bloomberg expecting at least one reduction.
Ten forecast no change, while Moody’s Analytics Inc was the only forecaster to predict a 25 basis-point increase.
Citigroup Inc yesterday wrote in a report after the GDP release that while it expects a rate cut by the central bank in the third quarter, it would not be surprised if this comes earlier given drags on domestic demand and the government expediting corporate restructuring in fragile sectors.
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has appointed Rose Castanares, executive vice president of TSMC Arizona, as president of the subsidiary, which is responsible for carrying out massive investments by the Taiwanese tech giant in the US state, the company said in a statement yesterday. Castanares will succeed Brian Harrison as president of the Arizona subsidiary on Oct. 1 after the incumbent president steps down from the position with a transfer to the Arizona CEO office to serve as an advisor to TSMC Arizona’s chairman, the statement said. According to TSMC, Harrison is scheduled to retire on Dec. 31. Castanares joined TSMC in
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
FACTORY SHIFT: While Taiwan produces most of the world’s AI servers, firms are under pressure to move manufacturing amid geopolitical tensions Lenovo Group Ltd (聯想) started building artificial intelligence (AI) servers in India’s south, the latest boon for the rapidly growing country’s push to become a high-tech powerhouse. The company yesterday said it has started making the large, powerful computers in Pondicherry, southeastern India, moving beyond products such as laptops and smartphones. The Chinese company would also build out its facilities in the Bangalore region, including a research lab with a focus on AI. Lenovo’s plans mark another win for Indian Prime Minister Narendra Modi, who tries to attract more technology investment into the country. While India’s tense relationship with China has suffered setbacks