Investing.com -- The South Korean economy grew largely as expected in the first quarter of 2023, avoiding a potential recession as steady private consumption helped offset a slump in capital investment.
South Korea’s GDP grew at an annualized 0.8% in the three months to March 31, data from the National Statistics Office showed on Tuesday. The reading was slightly less than Reuters estimates for growth of 0.9% and the prior quarter’s reading of 1.3%.
GDP grew a slightly bigger-than-expected 0.3% from the prior quarter, after contracting 0.4% in the fourth quarter of 2022. A recession is usually defined by two consecutive quarters of negative growth.
The reading was largely spurred by increased private consumption, as well as a mild recovery in exports after months of sharp declines. But growth was also capped by a sharp drop in capital investment, amid waning investor confidence in the country.
Slowing exports have been the biggest weight on South Korea’s economy over the past year, largely due to weakening offshore demand for semiconductors and worsening economic conditions in the country’s largest trading partners, particularly China.
China is South Korea’s largest export destination, and a COVID-induced slowdown in the country has seen shipments of chips and batteries from Korea plummet over the past year.
The Bank of Korea recently warned that growth will likely be weaker than its 1.6% forecast for 2023.
High inflation had also battered the South Korean economy through 2022, as the Bank of Korea struggled to contain a post-COVID surge in prices.
The central bank was among the first global banks to begin hiking interest rates in the wake of the pandemic, and hiked rates by a cumulative 300 basis points since July 2021.
But the bank recently held interest rates steady for two consecutive months, citing some easing in inflation and increased economic ructions.
The South Korean won was largely unchanged after Tuesday's reading.