SEOUL: South Korea's real gross domestic product (GDP) fell in the first quarter on weak export, but the country's finance ministry said it came mainly from one-off factors and forecast a rebound in the following quarter.
Preliminary figure for the real GDP, adjusted for inflation, shrank 0.3 percent in the January-March quarter from the previous quarter, Bank of Korea (BOK) data showed Thursday. The real GDP grew 1 percent in the fourth quarter of last year, reports Xinhua.It was the lowest since the fourth quarter of 2008 when the global financial crisis negatively influenced the export-driven economy. The latest negative GDP growth was tallied in the fourth quarter of 2017 when the real GDP dipped 0.2 percent.
From a year earlier, the real GDP rose 1.8 percent, posting the lowest in nine and a half years since the third quarter of 2009.
The quarter-over-quarter GDP reduction was far below market expectations of a range of 0.2-0.3 percent expansion, leading to the fluctuation in the local financial market. The South Korean currency fell versus the U.S. dollar and the main Kospi stock index slipped on worry about economic slump.
A senior finance ministry official, who declined to be identified, said the lower-than-expected GDP fall was attributed to the delayed fiscal spending, noting that the negative growth would be temporary.
During the quarter, the government spending was put off due to one-off factors such as infrastructure investments, which were in the process of designing and had yet to start construction works, and the postponement in purchase of weapons.
The delayed fiscal expenditure lowered the GDP growth rate by 0.7 percentage points in the first quarter, while the government spending raised it by 1.2 percentage points in the prior quarter, according to the BOK.As the unspent fiscal expenditure was to be reflected in GDP readings throughout the rest of this year, the real GDP was expected to rebound from the second quarter, the finance ministry official noted.
Finance Minister Hong Nam-ki, who doubles as deputy prime minister for economic affairs, told reporters that the government will continue deregulation efforts to encourage the private sector to make investments, in addition to the supplementary budget, which was submitted earlier in the day to the National Assembly for approval.