Fri, Oct 25, 2019 page10

• Growth slows in South Korea amid trade disputes

  • AFP, SEOUL
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  South Korea’s economic growth slowed in the third quarter, the Bank of Korea said yesterday, warning that it could post its weakest annual expansion for a decade in the face of trade disputes.

  GDP rose 0.4 percent quarter-on-quarter in the July-to-September period, down from 1 percent in the previous three months, the central bank said in a statement.

  Year-on-year expansion remained steady at 2 percent, but Bank of Korea Governor Lee Ju-yeol signaled that the overall figure for this year could fall below that level for the first time since 2009, in the depths of the global financial crisis.

  “For now, achieving 2 percent growth this year doesn’t look easy,” Lee told lawmakers.

  The figures come as the world’s 11th-largest economy faces fallout from the US-China trade dispute, while it is also mired in a standoff of its own with Tokyo stemming from World War II.

  South Korea and Japan have been embroiled in a dispute since July, when Tokyo tightened export controls on three chemicals essential to key products of South Korean tech companies such as Samsung Electronics Co.

  Exports rose 4.1 percent in the third quarter, thanks to more overseas demand for automobiles and semiconductors, but months of sharp falls at the beginning of the year hampered investment, the central bank said.

  Private consumption grew just 0.1 percent, while construction spending dropped 5.2 percent, it said.

  The central bank this month cut its key interest rate to a record low of 1.25 percent in an effort to prop up growth.

  Separately, Singapore’s economy might be a few quarters away from a recovery as the decline in trade and manufacturing this year has not really spread to other sectors, Monetary Authority of Singapore (MAS) Managing Director Ravi Menon said in an interview.

  The MAS’ baseline view is that “the current cycle should be bottoming out toward the end of the year and into next year,” Menon said.

  That is based on the assumption that the slump would be largely contained in the trade and manufacturing industries, he said.

  Singapore’s export-reliant economy has seen a sharper downturn in the second half of this year amid the trade tensions between the US and China.

  Even after easing policy earlier this month for the first time in three years, “we’re keeping some powder dry and we’ve said as much that, if necessary” the MAS is prepared to use it, Menon told Bloomberg Television.

  There is still policy “space,” he said.

  The MAS expects growth to come in at about the midpoint of an official 0 percent to 1 percent forecast range this year, then “improve modestly” next year.

  The Singaporean central bank, which uses the exchange rate as its primary policy tool, slightly reduced the slope of its currency band at its Oct. 14 decision.

  “It’s not going to be a robust recovery,” Menon said.

  The negative output gap — the estimated difference between the economy’s actual and potential performance — is not expected to widen, though there are risks it could, he said.

  Additional reporting by Bloomberg

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