South Korea’s economy grew by 0.3 percent during the first quarter of 2023, narrowly avoiding a recession following a contraction of 0.4 percent in the previous quarter. A recession is usually defined as two consecutive quarters of negative growth. The rebound was attributed to an increase in exports compared to the previous quarter and an improvement in domestic demand. Private consumption was the biggest contributor to growth, expanding by 0.5 percent. Meanwhile, exports rose 3.8 percent, rebounding from a fall of 4.6 percent in the previous quarter.
The recovery in South Korea’s economy can be partly attributed to strong consumption of leisure and tourism services, according to Min Joo Kang, a senior economist for South Korea and Japan at ING. Inflation has also decreased rapidly from its peak in the previous year and market interest rates have stabilized since the Bank of Korea paused its rate increases since January, which has likely boosted consumption in the last quarter.
Despite the recent rebound, South Korea’s economy is still expected to face significant challenges this year due to the global economic outlook. The OECD has downgraded its forecast for the country’s economic growth to 1.6 percent in 2023, from 1.8 percent estimated in the previous month. In 2022, South Korea’s economy grew 2.6 percent, which was a slowdown from the 4.1 percent growth in the previous year.
The South Korean economy has been impacted by the COVID-19 pandemic, as well as by geopolitical tensions and supply chain disruptions. The country has implemented various measures to support its economic recovery, including fiscal stimulus and low interest rates. The government also plans to invest heavily in green infrastructure to create jobs and drive economic growth in the coming years.
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