SeongJoon Cho | Bloomberg | Getty Photos
At the same time as the worldwide financial system is headed right into a recession, South Korea’s financial system noticed a small development backed by what one analyst attributed to “revenge spending” because the nation reopens.
Gross home product rose 0.3% for the July-September interval, according to Bank of Korea data — the slowest quarterly development seen in a yr. It grew by 0.7% within the earlier quarter.
“I feel that the momentum domestically is moderately resilient,” mentioned Kathleen Oh, Financial institution of America’s Korea economist on CNBC’s “Squawk Box Asia.”
“Consumption is holding up robust with the reopening and pent-up demand in companies, we’re truly seeing fairly robust ‘revenge spending’ in leisure, leisure and journey,” she mentioned, including that home demand is prone to assist continued development till the remainder of this yr.
South Korea’s third quarter GDP report confirmed development was backed principally by client spending and funding in amenities, which grew 1.9% and 5% respectively.
Reopening-boosted pent-up client spending slowed whereas funding confirmed a extra resilient restoration.
In keeping with the Korea Culture and Tourism Institute, the full spending for tourism and leisure actions from January to October was about 67 trillion gained ($47.2 billion). Whereas it was greater than 5% decrease than the identical interval in 2019, earlier than the pandemic, it nonetheless noticed a greater than 21% bounce from final yr.
Spending dropped greater than 28% in 2020 in the identical interval in 2019 and maintained comparable ranges in 2021.
“Non-public consumption maintained an total sturdy tempo of enhance,” Goldman Sachs analysts mentioned in a word on Thursday, including that it was stronger than anticipated and pushed by spending on vehicles and companies.
Economists at ING additionally mentioned, “Reopening-boosted pent-up client spending slowed whereas funding confirmed a extra resilient restoration.”
Recessionary stress in 2023
ING economists count on South Korea to face a recession in 2023.
“Based mostly on the grim outlook for consumption and exports from not too long ago launched knowledge, we preserve our view that the financial system will expertise a average recession early subsequent yr,” they mentioned in a word.
Oh from Financial institution of America additionally mentioned she was much more bearish on the financial system’s outlook for subsequent yr.
“It is the exterior demand or the exterior atmosphere that is been placing stress total on the manufacturing facet or the manufacturing facet,” she mentioned.
Economists at Goldman Sachs not too long ago downgraded their views for South Korea’s development for 2023 from 1.7% to 1.4%.
“The principle causes for our extra bearish development views are present and potential weak spot in exterior demand,” the economists mentioned in a word.
They pointed towards a possible for spillovers from a worldwide sluggish financial system to home demand in addition to native headwinds together with financial tightening and, within the case of South Korea, fiscal consolidation.
