South Korea’s economy shrank 0.3 percent in the first quarter, its worst performance for a decade, as exports fell and companies cut investment amid the US-China trade dispute, the Bank of Korea said yesterday.
It was the largest contraction for Asia’s fourth-biggest economy since a 3.3 percent drop in late 2008 at the height of the global financial crisis.
The trade-dependent country last posted negative growth — of minus-0.2 percent — in the fourth quarter of 2017.
Falling exports and capital investment have put a dent in the economy, despite increased government and consumer spending, the central bank said in a statement.
Exports shrank 2.6 percent quarter-on-quarter, a sharp contrast from a year earlier, when they rose 4.4 percent, riding on solid demand for memory chips — a key South Korean product.
Infrastructure investment dropped 10.8 percent over the same period, the largest contraction since a 24.8 percent reduction in early 1998 when the nation received a US$58 billion bailout package from the IMF.
South Korean President Moon Jae-in’s government on Wednesday approved a US$5.8 billion supplementary budget to boost exports and address air pollution.
However, critics say that Moon’s flagship economic policy of “income-led growth” — featuring steep increases in the minimum wage — is hurting those it is intended to help by raising employment costs.
The disappointing figures came after the central bank earlier this month lowered its growth outlook by 0.1 percentage points to 2.5 percent, citing sluggish global demand for memory chips and “intensifying trade disputes” worldwide.
South Korea’s GDP grew 2.7 percent last year, the weakest pace in six years.
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