South Korea shook out of a recession in the first half with a bigger-than-expected rebound in the third quarter to raise expectations for less severe annual negative growth in the pandemic-battered 2020, owing to a recovery in exports and improvement in domestic demand from unprecedented fiscal and monetary stimuli.

The real gross domestic product added 1.9 percent to 456.9 trillion won ($404 billion) in the July-September period, returning to the positive in the biggest jump since the first quarter of 2010 after contractions of 3.2 percent and 1.3 percent in the previous two quarters, preliminary data from the Bank of Korea (BOK) showed Tuesday.

Against a year earlier, the GDP was off 1.3 percent.

The BOK earlier projected the first negative growth since the 1997-1998 financial crisis to be 1.3 percent this year if the economy can manage to grow around 1.5 percent in the second half.

Markets stayed flat to the better-than-expected performance. The main Kospi ended Tuesday down 0.56 percent at 2,330.77. The Korean currency finished at 1,125.5 won against the US dollar, up 2.2 won from the previous session.

The impact on the bond market may be bigger since the BOK governor Lee Ju-yeol indicated a lengthier pause in additional monetary easing after staying pat on the policy rate at a historic low of 0.50 percent last month, depending on the third-quarter GDP results. The final policy meeting is held next month.

The yield on the benchmark three-year government bond finished Tuesday at 0.90 percent, down 1 basis point from the previous session.

Exports, the main growth driver, gained 15.6 percent versus the previous quarter which witnessed a 16.1 percent dip. Net export contribution to GDP growth reversed to 3.7 percentage points from negative 4.1 percentage points in the previous quarter.

Facility investment expanded 6.7 percent in the third quarter, while construction investment sank 7.8 percent.

Manufacturing output increased 7.6 percent against the previous quarter. Service sector output added 0.7 percent.

Private consumption fell 0.1 percent, reversing from a 1.5 percent gain in the second quarter primarily led by state relief check handout.

Government spending in the third quarter rose 0.1 percent, slowed from 1.1 percent in the previous quarter.

The country’s real gross domestic income for the third quarter totaled 453.4 trillion won, up 2.5 percent from the previous quarter and 0.5 percent from a year earlier.

By Cho Jeehyun

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]