South Korea’s economic growth slowed in the past quarter, the central bank said yesterday, as a diplomatic row with top trading partner China over a US missile shield hit exports.
The figures come as South Korea struggles to shake off an extended economic slowdown, a key factor in the election of new South Korean President Moon Jae-in in May, who has promised a massive fiscal stimulus package.
However, second-quarter sales in the nation’s key automobile industry were hammered by a wave of Chinese boycotts, seen as economic retaliation to Seoul’s agreement to a new US missile defense system, stalling any recovery.
GDP in Asia’s fourth-largest economy grew 0.6 percent from the previous quarter, when it expanded 1.1 percent, the Bank of Korea said.
Economic growth expanded 2.7 percent from a year ago, also slowing from the 2.9 percent annual growth recorded in the first quarter.
Exports — which account for about two-fifth of the economy — shrank 3 percent from the previous quarter, the biggest quarterly drop in almost three years.
“Exports of cars declined, in particular, as their overseas sales fell, hurting sales of auto component makers as well,” Bank of Korea director Chung Kyu-il told reporters.
Major South Korean exporters, including top automaker Hyundai, have been hit by a wave of consumer boycotts in China and what they saw as economic retaliation by Beijing.
Diplomatic tension rose after Seoul deployed a powerful US anti-missile system to guard against threats by North Korea despite opposition by China that sees it as a threat to its own defense capability.
Beijing since then slapped a series of measures against South Korean firms and banned Chinese group tours to Seoul.
Hyundai on Wednesday reported a 48 percent decline in second-quarter profit amid plunging sales in China.
However, increases in consumer spending and infrastructure investment helped offset falling exports, Chung said, adding that consumer spending rose in the fastest pace since late 2015.
The upcoming launch of key handsets by major tech firms, including Samsung Electronics, are expected to boost exports and consumer spending later this year, Chung said.
Samsung — South Korea’s largest firm by value and the world’s top smartphone maker — is set to launch its new flagship handset, Galaxy Note 8, next month.
Chung maintained the nation’s growth outlook of 2.8 percent this year.
The South Korean Ministry of Finance this week revised this year’s growth outlook to 3 percent — the fastest in three years — citing the impact of a US$10 billion stimulus package announced by Moon.
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