Korean 4Q21 GDP growth recovers| MENAFN.COM

Monday, 16 May 2022 08:45 GMT

Korean 4Q21 GDP growth recovers


(MENAFN- ING) Better than 3Q21

After a Covid-battered 3Q21 GDP growth rate of only 0.3%QoQ, the bounce back to 1.1% was a welcome recovery, especially as Korea is still not out of the woods as far as its latest Covid wave goes. 

The 1.1% QoQ GDP growth rate delivers a respectable full-year growth rate for 2021 of 4.1% and provides a solid base for growth in 2022. GDP growth is likely to be harder this year, lacking the positive base effects of 2021 and working against rising policy rates and a worsening risk environment. But our existing 2.8% 2022 GDP forecast looks like it will need revising up to around the 3.0% level - which would be on par for this economy, and a decent result against a trickier background. 

Contributions to QoQ GDP growth (pp)


CEIC, ING
What led the growth?

Unlike the previous two quarters, government fixed capital formation (0.5pp) provided a helpful lift to GDP in the fourth quarter, bolstering what was also a solid contribution from personal consumer expenditure (0.8pp). Spending on new construction (0.4pp) was also a positive contributor. A positive net export contribution (+0.3pp) was totally subsumed by shrinking stocks (-0.3pp), as is often the case. 

What next for the Bank of Korea?

These strong growth figures on their own don't require a radical reassessment by the Bank of Korea, but they vindicate the policy tightening that has already taken the policy rate to 1.25% from its pandemic low of 0.5%. 

They also raise the probability that we see one more rate hike this quarter. BoK Governor Lee steps down after the March meeting, and it could be some time before a replacement is appointed due to the timing of the Presidential Election. Consequently, there is now a stronger argument for a further precautionary hike before the end of the quarter in the event of a temporary leadership vacuum - though this doesn't seem to be buoying the KRW, which softened on the release and is trading a little above USDKRW 1197, up from yesterday's lows of about 1193.50. 

MENAFN24012022000222011065ID1103588102


*Content Disclaimer:
This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more here: https://think.ing.com/about/disclaimer/

Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.