South Korea Delivers Big GDP Beat In Boon To Global Reflation Narrative

If you were looking for a positive development amid a sea of scary-sounding pandemic headlines, you might look to South Korea.

On Wednesday, the global trade bellwether said the economy grew far faster than expected in the fourth quarter, expanding 1.2% QoQ, against estimates for a 0.7% print.

Government spending contributed heavily, but investment looks decent, and private consumption rose 0.7%. The 1.2% pace is the quickest since the third quarter of 2017.

2019 was a rough year for South Korea. The Sino-US trade war and a downturn in the global semi cycle precipitated a 12-month slump in exports and contributed to the lowest inflation on record. The country briefly flirted with outright deflation in September.

Seoul was also burdened in the second half by the worst diplomatic row with Tokyo in recent memory. That dispute remains “live”, so to speak.

First-20 days exports data for January showed shipments falling just 0.2%, the best showing in more than a year. Semi shipments rose over the period the first time since late 2018.

The first signs of a turnaround showed up in December’s export data, which tipped a much shallower contraction than expected. Shipments to China actually rose. The first-20 days figures for January bode well for the full-month numbers.

Hopefully, the spread of the Wuhan virus throughout the region won’t derail the nascent rebound.

BoK Governor Lee Ju-yeol struck a somewhat encouraging tone on the economy last week. The bank projects 2.3% growth in 2020. For the full year 2019, South Korea’s economy expanded 2%, in line with BoK’s forecast, but the slowest since 2009.


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