South Korean economy revived in Q3 2014

The South Korean economy growth revived in the third quarter. Higher public spending and consumption recovered provide support for politicians who are trying to stimulate the economy through fiscal and monetary stimulus. The Gross domestic product grew by 0.9% quarter on quarter, the latest data revealed by the Central Bank of South Korea. Number matches the expectations of economists surveyed by the agency. On an annual basis the increase amounted to 3.2%. The government increased the cost and ease the rules of the real estate market in order to support demand. Turn since August the central bank has cut interest rates twice, which is a 4-year low, to stimulate recovery.

Incentives of managers do not stop here. The Finance Minister of South Korea Choi Kiunga Juan promised to spend 31 trillion won (29 billion USD) this year in the form of incentives and the proposed budget for 2015 amounted to a record 376 trillion won. In components of GDP, private consumption grew by 1.1% in the third quarter from the previous quarter, when contracted by 0.3%. Increased by 2.2% of government spending contribute most to economic growth during the period from July to September.

The investment companies decreased by 0.8% after rising 1.1% in the second quarter of the year. Moreover, exports decreased by 2.6% mainly due to the slowdown in activity in China. The decrease is the first of the year, with most of the shrinking export liquid crystal displays and chemical products. Last week, the central bank lowered its forecast for economic growth for 2015 to 3.9% from the previous 4%. On the inflation forecast to decrease to 2.4% from 2.7% initially projected. For 2014 the central bankers are predicting growth of 3.5% instead of 3.8% and inflation of 1.4% instead of 1.9%.

In September, inflation in South Korea rose to 1.1% yoy. Its size, however, is the lowest since February and is well below the target range, the bank pursued, namely – from 2.5% to 3.5%.