South Korea’s economy is growing at a very low speed. The overall growth of the economy is only 0.1% in the quarter. While it was only 1.5% yearly growth. The experts predicted a growth of 0.4% quarterly with 2% growth yearly. This slow growth rate is creating difficulties for businesses to look for investment in the country. But why is the country’s growth moving towards saturation? Let us find out the exact reasons that are contributing to such a situation.
Why Is South Korea’s Economy Moving Slower Than Expected?
South Korea’s economy has weaker results in terms of its growth. It has various causes and concerns. If we pay close attention to South Korea’s growth trajectory, the country is highly dependent on exports for its growth. This includes the exports of technology including memory chips. It is slowing down. While exports can be affected by outside situations as well. The circumstances of other countries also impact the exports of a country. For example the ongoing tensions in the Middle East.
Bank Of Korea has also given its announcement on the recent fall in the economy. After the quarterly performance weakens to 0.1%, the Bank of Korea might prefer to revise its expected economic growth from 2.4% to lower. The consumers are spending more. The percentage increased by 0.5%. While the exports are on a continuous fall. As the economy is falling, the higher interest rates might not help the economy to sustain. Thus, BOK can consider cutting down the interest rates.
Considering the emergency, BOK can also cut the rates by January which is sooner than expected. Apart from the interest rates, there are also risks of increasing debt in the country. During the pandemic, the country needed financial support to help provide aid. The predictions are that the economy will fall in the coming quarters as well. The last quarter might have negative reports. Otherwise, there will be very little growth.
The Korean economy has been facing a sudden decline for a few months. It is less than the expert’s prediction. There will be a lot of fluctuations in the coming months. The major reason is the exports. The country has more export-oriented growth. However, it is facing a decline because of the decline in chip exports from the country. Along with this, the country is facing tough competition from China. There is also tension in the country with North Korea. Stay tuned for more information on our website.