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South Korea's economy rebounds from Mers outbreak as shoppers return
[SEOUL] South Korea's economy rebounded in the third quarter as an outbreak of the Middle East Respiratory Syndrome receded and consumers ventured back to the shops, offsetting weakness in sales abroad.
Gross domestic product expanded 1.2 per cent from the three months through June, when it grew by only 0.3 per cent, the Bank of Korea said Friday. Economists surveyed by Bloomberg had projected a 1 per cent increase. GDP expanded by 2.6 per cent from a year earlier.
Policymakers including Finance Minister Choi Kyung Hwan and Bank of Korea Governor Lee Ju Yeol have highlighted positive signs in the economy, while cautioning that risks remain from weakness and uncertainties in overseas markets.
The government introduced temporary consumption tax cuts and an extra budget after Mers spread to Korea in May, frightening away foreign tourists and local shoppers. Authorities declared in July that the virus was no longer a concern.
"Improved growth would give the BOK some justification to hold interest rates for now," An Ki Tae, a Seoul-based economist at NH Investment & Securities Co., said before the release. He added that the softness of growth in the second quarter could make the latest figures look stronger than they really are.
Private-sector consumption rose 1.1 per cent in the third quarter from a contraction in the previous period, while government spending increased 1.9 percent and facilities investment rose 2 per cent, Friday's statement showed. Construction investment gained 4.5 per cent as the property market boomed.
The central bank held its key interest rate unchanged at a record low 1.5 per cent on Oct 15. It adjusted its 2015 growth forecast the same day to 2.7 per cent from 2.8 per cent, citing lower-than-expected second-quarter growth. The BOK's monetary policy committee next meets to decide rates on Nov 12.
Private analysts surveyed by Bloomberg from Oct 8 to Oct 13 were more pessimistic about Korea's economy, forecasting 2.4 per cent GDP growth for this year.
Exports, which have fallen every month this year, will contribute less to growth than domestic demand, the BOK said on Oct 15.
Citigroup Inc. postponed its call for a rate cut until 2016, citing reasons including an improvement in domestic demand.