By Pranoy Krishna
BENGALURU (Reuters) – South Korea’s economy barely grew last quarter as persistent global trade risks and weak domestic demand continued to sap momentum, a Reuters poll of economists found.
Grappling with its worst political crisis in decades, marked by the impeachment of the president, consumer sentiment took a hit in Asia’s fourth-largest economy which was compounded by U.S. President Donald Trump’s hefty tariffs on key exports to the United States.
South Korea’s gross domestic product (GDP) probably grew a seasonally adjusted 0.1% in previous quarter, according to the median forecast of 23 economists in the April 15-21 poll, matching the growth rate of the last two quarters of 2024.
Forecasts ranged widely from -0.2% to 0.5%, reflecting the uncertainty from Trump’s tariffs on auto exports, threatening South Korea’s car shipments to the U.S., a key component of its overall trade.
If the forecasts hold, it would mark the longest stretch of near-flat growth in South Korea’s economy in decades. The Bank of Korea (BOK), in a report on April 17, warned the export-driven economy may have contracted in the first quarter of this year.
The GDP data is due to be released on April 24.
“Both internal and external growth drivers are sputtering at the moment, there is a risk Korea’s GDP will have stalled in the first quarter … exports already started to slow before the arrival of tariffs by the U.S., pulling down GDP growth and investment,” said Frederic Neumann, chief Asia economist at HSBC.
“Korea will continue to face headwinds for the remainder of the year from likely slowing growth in key economies, including the United States, Europe, and China.”
On an annual basis, the economy probably expanded 0.1% last quarter, down sharply from 1.2% in the previous quarter, the poll showed. Forecasts ranged from -0.3% to 0.8%.
A separate poll conducted last week predicted South Korea’s economic growth to average 1.3% this year, lower than the BOK’s 1.5% forecast.
Dimming growth prospects have fuelled demands for a rate cut, but economists in the poll said the BOK faces challenges in delivering one due to pressure on the Korean won, which fell to a 16-year low on April 9.
The Bank of Korea (BOK) kept its key interest rate unchanged at 2.75% last week to support the currency, while signalling rate cuts in the coming quarters to support slowing growth.
(Reporting by Pranoy Krishna; Polling by Rahul Trivedi in Bengaluru and Jihoon Lee in Seoul; Editing by Vivek Mishra, Hari Kishan and Kate Mayberry)
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