Compared to the last contraction in the economy in late 2022 reeling from the COVID-19 pandemic, the latest 0.2% drop is rather a correction, not a sign of recession, according to the bank.“The retreat is largely due to a high base effect following a big leap in the first quarter during the growth phase,” said Shin.“Inflation and high interest rate are expected to moderate, helping recover domestic demand incrementally.” He also projected facility investment will gain steam in the semiconductor industry in the third quarter, while the steady export growth will be a boon to the Korean economy.
The latest reading suggests that the Korean economy expanded 2.8% on-year during the first six months of this year, a tad below the central bank’s earlier forecast of a 2.9% growth.“If the country’s economy grows 2.2% in the second half as expected, the country is expected to achieve a growth of 2.5% this year,” meeting the central bank’s earlier forecast made in May, said Shin Seung-chul, director general of the Economic Statistics Department at the Bank of Korea.
South Korea’s economy unexpectedly slowed in the second quarter on softer private consumption and business investments, reinforcing expectations for a rate cut, but the central bank brushed off any excessive concern about the latest retreat and kept high expectations for a 2.5% growth this year.
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