Korea's Economic Growth in the First Quarter of 2018
The Korean economy bounced back in the first quarter of 2018 on the back of exports and government spending. The nation's gross domestic product (GDP) grew by 1.1 percent in the first three months of 2018 compared to the last quarter of 2017. The economy expanded by 2.8 percent from a year earlier. This rebound was led by booming exports of semiconductors, with the nation's overall export volume gaining 4.4 percent quarter on quarter. The robust growth in semiconductor exports offset weak domestic demand. Government spending increased by 2.5 percent, recording the fastest quarterly expansion in six years, backed by higher spending on health care. The government has been increasing its support for public health insurance as part of its health care reform.
Consumer spending rose by a mere 0.6 percent from the previous quarter, posting its slowest growth in a year. Private consumption remained lackluster due to a persistently high youth unemployment rate and growing household debt levels. Construction investment expanded by 2.8 percent as housing transactions were boosted ahead of stricter housing market regulations effective from April 2018. Equipment investment rebounded and expanded by 5.2 percent due to increased spending on facility investment in the shipbuilding, aircraft, machinery and chip-manufacturing sectors.
The Bank of Korea expects the economy to grow by 3 percent in 2018, but such a solid growth depends on global demand for Korean semiconductors and other manufactured products. The economy may face some headwinds from a slow domestic job growth and any fallout from a potential trade war between the United States and China.
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