Bank of Korea Governor Lee Ju-Yeol. Photo: AFP/ Jung Yeon-je
Bank Of Korea Governor Lee Ju Yeol / AFP PHOTO /

South Korea’s economy grew 0.6%, quarter-on-quarter in the third quarter of 2018, and 2% year-on-year in Q3, according to data released by the Bank of Korea today.

The quarter-on-quarter figure of 0.6%, was the same as Q2, but the year-on-year figure was the slowest annual growth since 2009. During the third quarter, construction spending and corporate facility investment rates both fell, but exports remained robust, as did consumer spending.

To meet the BOK’s target growth rate of 2.7% for 2018, the economy will need to expand at least 0.84% in the last quarter, Yonhap news agency reported. The 2.7% target growth target has already been downgraded from 3% earlier this year.

Despite positive export data, trade-dependent South Korea is jittery under the clouds that continue to hang over global trade despite the outcome of the recent G20 summit, which saw Beijing and Washington declare a 90-day truce in their tariff war.

However, a governmental package including a fuel tax cut, as well as year-end visitors who come to Korea for the end-of-year shopping and skiing season, are expected to provide some stimuli as 2018 winds down.

The key risk factors being monitored by Seoul economic wonks are high levels of household debt, runaway metropolitan real-estate prices and the cross-Pacific trade war.

A major question for next year is to what extent Seoul will maintain its controversial “income-led growth” policy, which has boosted minimum wages for two years running.

That policy has been praised by labor groups and some economists, who say that low wages are behind high household debt and weak domestic consumption. However, it has been widely lambasted by small business owners, who say they cannot afford to hire workers when rates are lifted.