SEOUL: South Korea’s economic growth slowed in the past quarter, the central bank said Thursday, as a diplomatic row with top trading partner China over a US missile shield hit exports.
The figures come as South Korea struggles to shake off an extended economic slowdown, a key factor in the election of left-leaning new President Moon Jae-In in May, who has promised a massive fiscal stimulus package.
But second-quarter sales in the country’s key automobile industry were hammered by a wave of Chinese boycotts, seen as economic retaliation to Seoul’s agreement to a new US missile defence system, stalling any recovery.
Gross domestic product in Asia’s fourth-largest economy grew by 0.6 percent in April to June from the previous quarter, when it expanded by 1.1 percent, the central Bank of Korea said.
The GDP expanded 2.7 percent from a year ago, also slowing from the 2.9 percent annual growth recorded in the first quarter.
Exports — which account for about two fifth of the nation’s economy — shrank three percent from the previous quarter, the biggest quarterly drop in almost three years.
“Exports of cars declined in particular as their overseas sales fell, hurting sales of auto component makers as well,” Chung Kyu-Il, director at the Bank of Korea, told reporters.
Major South Korean exporters including Hyundai — the country’s top carmaker — have been hit by a wave of consumer boycotts in China and what they saw as economic retaliation by Beijing.
Diplomatic tension rose after Seoul deployed a powerful US anti-missile system to guard against threats by North Korea despite opposition by China that sees it as a threat to its own defence capability.
Beijing since then slapped a series of measures against South Korean firms and banned Chinese group tours to Seoul. Hyundai on Wednesday reported a 48-percent drop in its second-quarter profit amid plunging sales in China.
But increases in consumer spending and infrastructure investment helped offset falling exports, Chung said, adding consumer spending rose in the fastest pace since late 2015.
The upcoming launch of key handsets by major tech firms including Samsung are expected to boost exports and consumer spending later this year, Chung said.
Samsung — South Korea’s largest firm by value and the world’s top smartphone maker — is set to launch its new flagship handset, Galaxy Note 8, next month.
Chung maintained the country’s growth outlook of 2.8 percent this year.
Seoul’s finance ministry this week revised this year’s outlook to 3 percent — the fastest in three years — citing the impact of a $10-billion stimulus package announced by newly-elected President Moon Jae-In.