Korea’s Q2 GDP slows on weak consumption and exports, and MERS

SEOUL – South Korea’s GDP slowed to 2.2% y/y in Q2, compared with 2.5% in the first quarter. This is the slowest growth rate since Q1 2013. Sequentially, Korea’s GDP grew 0.3% q/q sa, marginally lower than the Bank of Korea’s  estimate of 0.4% earlier this month, and below 0.8% reported for Q1, suggesting that growth momentum has slowed significantly.

Private consumption growth edged up to 1.6% y/y in Q2, from 1.5% in Q1,  but sequentially, it contracted 0.3% q/q sa in Q2, compared with a 0.6% gain in the previous quarter, due to the outbreak of MERS.
Notably, facilities investments moderated to 4.8% y/y (0.4% q/q), from 5.8% in Q1, as exports weakened. Exports contracted 0.9% y/y (0.1% q/q), while imports grew 1.1% (0.5% q/q).

In a research note, ANZ Bank says that, given the Q2 GDP figure today, it maintains its full-year GDP projection at 2.7% for 2015, below the Bank of Korea’s latest projection of 2.8%.
“Note that our forecast has already considered the possible contribution of extra budget and also assumes that the impact of MERS will fade out by end of Q3. For inflation, we expect that Korea’s CPI will remain subdued, and rise by 1.3% y/y in H2, leading to a 0.9% rise for the whole year 2015.”  www.live.anz.com (ATI).