South Korea’s gross domestic product (GDP) rebounded 1.1 percent in the second quarter against a negative 0.4 percent number in the previous three month period to avoid a technical recession, led by heavy government spending as the economy lumbers through its worst year in a decade.

According to the preliminary second-quarter GDP data released by the Bank of Korea (BOK) on Thursday, the country’s GDP turned direction to growth above 1 percent to show the strongest-yet figure since 1.5 percent in the third quarter of 2017. Against a year ago period, GDP grew 2.1 percent. The total GDP for the second quarter was 459.96 trillion won ($390.5 billion).

BOK chief Lee Ju-yeol in a parliamentary hearing earlier this week said the country may miss the bank’s estimated 2.2 percent growth target for this year – the lowest in a decade – if trade barriers from Japan add to the woes on the external front amid worsening exports.

The BOK last week delivered its first rate cut in more than three years and revised down GDP growth estimate to 2.2 percent from 2.5 percent projected in April.

On Thursday, Kospi retreated 0.38 percent to 2,074.48. The Korean currency closed at 1,181.5 won against the U.S. dollar, down 3.6 won from the previous day.

The BOK downplayed the stronger-than-expected figures as they go against across-the-board fall in the first quarter and were primarily helped by government stimuli.

Facility investment gained 2.4 percent after a 9.1 percent contraction in the previous quarter. Construction investment expanded 1.4 percent from the first quarter when it shrank 0.8 percent. The growth was led by public infrastructure projects subsidized by tax spending. Against a year-ago, construction investment and facility investment fell 3.5 percent and 7.8 percent, respectively.

Exports, the main growth driver, grew 2.3 percent in the second quarter on improvement in memory chip and automobile shipments. Global demand for Korea’s main export item memory chip remained weak due to the escalation in U.S-China trade tensions.

The losing streak in exports since December turned to double digits from June. The outlook is even murkier as Japan has slammed export curbs on materials that can shake Korea’s components industry.

Private consumption added 0.7 percent and government spending jumped 2.5 percent on quarter.

Manufacturing output expanded 1.8 percent versus the first quarter, utilities output 8.3 percent, construction 1.4 percent, and service 0.6 percent. Output of agriculture, forestry and fishery sector shriveled 3.7 percent on quarter.

Gross domestic income in the second quarter totaled 449.83 trillion won, down 0.5 percent from three months ago.

By Cho Jeehyun

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]