South Korea rebounds from recession as exports jump

South Korea rebounded from recession last quarter, as the fastest export-growth in decades helped buffer the economy from a summer wave of the coronavirus that weighed on consumers.

Gross domestic product increased 1.9% in the three months through September from the prior quarter, the Bank of Korea reported Tuesday. Exports increased the most since 1986. Economists had forecast an overall growth rate of 1.3%, following two quarters of contraction. Compared with the same period last year, the economy shrank 1.3%.

Key Insights

• A late summer resurgence of the virus that led to tighter social distancing rules in South Korea has eased in recent weeks, giving relief to consumers whose spending is likely to pick up after slipping last quarter. President Moon Jae-in has said the country should seize the chance to restart its recovery.
• On the trade front, South Korean memory chips and electronics have benefited from a shift to work-and study-from-home during the pandemic. A rebound in China, South Korea’s biggest trading partner, is also supporting recovery, although the export-dependent economy remains vulnerable to disruptions in the U.S. and Europe, where the epidemic is worsening.
• Last quarter’s export recovery also fueled a jump in facilities investment, led by spending on machinery and transportation equipment, the BOK said.
• The BOK this month pointed to signs of economic green shoots while holding its key interest rate at a record low. Yet Governor Lee Ju-yeol last week said the country’s potential growth rate may have slid below the bank’s prior estimate of 2.5%, and private sector analysts see GDP shrinking for the full-year for the first time since the late 1990s Asian financial crisis, despite a second-half recovery.