By Eun-Young Jeong
SEOUL -- South Korea's economy expanded quarter-on-quarter, as
Asian economies shake off the pandemic's worst effects and return
South Korea, during the July-to-September period, reported its
gross domestic product rose 1.9% from the previous quarter, aided
by a strong recovery in the country's exports of cars and memory
chips. Asia's fourth-largest economy, South Korea had fallen into a
recession earlier this year after two straight quarters of negative
South Korea's better-than-expected performance comes after China
reported this month that its third-quarter GDP had expanded 4.9%
from the prior year. Vietnam, which has kept cases low throughout
the pandemic and never reported an economic dip, experienced 2.6%
growth over last year's third-quarter. Taiwan, another Covid-19
success, is expected to post year-over-year GDP expansion of 2.2%
later this week after declines the previous quarter.
The strong economic numbers underpin how swaths of Asia have
allowed citizens to regain some normalcy during the pandemic,
dining at restaurants, watching musicals and marching into the
office -- albeit with a face mask. It contrasts with intensifying
restrictions applied across Europe and record-level daily cases in
the U.S., where businesses wonder how lockdowns and pandemic
paranoia may dull commerce.
South Korea, which dealt with a resurgence of Covid-19 cases
during its third quarter, had slumped into its first recession in
more than 15 years. The economy grew quarter-on-quarter. But on a
yearly basis, the country's GDP contracted at 1.3% -- though it
handily topped a median forecast of a 2% decline, according to
seven economists polled by The Wall Street Journal. South Korea's
quarter-to-quarter results also bested consensus expectations by
two-tenths of a percentage point.
The country's rebound has been backed by resilient global trade.
In the third quarter, South Korea's net exports jumped 15.6% from
the previous quarter and contributed 0.4% percentage point to its
overall GDP. In September, South Korea recorded a yearly growth in
exports for the first time since February as shipments to the U.S.
and Europe rose.
Export demand has continued to improve this month, rising 5.9%
for the first 20 days of October from the previous year after
adjusting for the number of working days. Exports in the third
quarter showed their biggest rise in decades.
At a Tuesday policy meeting, Finance Minister Hong Nam-ki said
South Korea's economy had "entered a recovery path for
normalization." Mr. Hong added he expects the economy to expand in
the fourth quarter, too.
Remote working and schooling have also driven up demand for
electronic gadgets and data servers that comprise the internet's
plumbing, a win for South Korea's chip makers like Samsung
Electronics Co. and SK Hynix Inc.
"Korea has benefited a lot from the global demand for
electronics," said Alex Holmes, a Singapore-based economist at
Capital Economics, adding slumps in petrochemicals and oil refining
have been drags on exports.
South Korea's economy is expected to decline by around 1% this
year, the best-performing major country apart from China, according
to the Organization for Economic Cooperation and Development's
latest forecasts. By contrast, the U.S., Germany and Japan are
forecast to contract by 3.8%, 5.4% and 5.8%, respectively, the OECD
China's economy, which grew for the second straight quarter, has
helped lift some neighboring countries and major trade
Japan, which has yet to report third-quarter figures, has seen
its economy rebound more quickly than expected thanks to strong
demand for cars and high-tech goods such as
semiconductor-manufacturing machines, with exports to China rising
14% in September from the prior year. On a quarter-to-quarter
basis, Singapore's economy grew by nearly 8% for the third quarter,
though it declined 7% year-over-year.
South Korea's economic growth came as it dealt with a second
wave of virus cases that began in early August. During that month,
the country reported more cases in three weeks than it had in the
prior three months combined. But the raw numbers were a fraction of
larger outbreaks elsewhere: cases peaked at 441 on Aug. 27.
One positive surprise, economists say, is the relatively modest
fall in private consumption, which dropped 0.1% from the previous
quarter, or by 4.5% when compared with the previous year.
Some economists had expected South Korea to be hit harder, as
the country kept elevated social distancing measures in place
nationally for much of August and September. Those restrictions
limited gatherings to 50 indoors and closed venues like museums.
But restaurants, bars and other stores largely stayed open,
although at reduced operation hours.
South Korea's fast response dealing with its second wave helped
small-business owners like Bae Jin-sung get back on their feet. His
"Cuisine La Clé" restaurant in Seoul, which opened last year, had
seen sales nosedive as tourism all but disappeared and locals
stayed indoors. One day, he recalled, the restaurant had sales of
just 60,000 South Korean won, or $53.
But on a recent evening, days after South Korea relaxed social
distancing to its lowest levels, Mr. Bae had to turn away diners
who had shown up without reservations. "I'm so thankful," he
Park Jeong-woo, a Seoul-based economist at Nomura, says South
Korea's export-led growth doesn't have the same pull on the
domestic economy as it used to have. The gains in exports aren't
leading to investments in South Korea because of automation and
offshore production, Mr. Park said. "That's going to lead to
reduced jobs and ultimately, less consumption," he said.
For now, Lim Byoung-jin's "Bar Cham" is back to being busy. It
was packed on a recent weekend, even asking latecomers to get on a
When the government rolled out its strictest measures for the
Seoul area in August, the bar for two weeks opened during the
afternoon and closed at 9 p.m. -- a divergence from its usual
operations of 7 p.m. to 3 a.m. The bar's frequent customers still
showed up, but Mr. Lim, the owner, said he had to go into debt to
handle the costs.
"We managed to survive," he said. "I hope this can continue, but
you never know when things will quickly change again."
Kwanwoo Jun in Singapore and Peter Landers in Tokyo contributed
to this article.
Write to Eun-Young Jeong at Eun-Young.Jeong@wsj.com
(END) Dow Jones Newswires
October 27, 2020 08:31 ET (12:31 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.