The South Korean won is recording modest gains against multiple currency rivals on Tuesday as the nation’s economy returned to growth in the third quarter. After enduring the sharpest economic downturn in more than a decade, Seoul was able to resuscitate the economy through a series of COVID-19 stimulus measures and surging exports.
During the July-to-September period, the gross domestic product (GDP) advanced 1.9%, following a 3.2% slide in the second quarter. The market had penciled in an expansion of 1.7% in the three months ending in September. This is the fastest quarterly expansion since the January-to-March period of 2010.
The economy rebounded mainly due to a 15.6% surge in exports, exceeding the 4.9% boost in imports.
South Korea saw growth in manufacturing (7.6%) and services (0.7%), but the East Asian powerhouse reported a contraction in construction (-5.5) and utilities (-7.4%). Moreover, consumption slid 0.1%, and gross fixed capital formation dropped 1.9%.
The Bank of Korea is projecting a 1.3% slide for the year. But Alex Holmes, an economist at research firm Capital Economics, told Reuters that he only anticipates a 1% contraction in GDP for all of 2020, alluding to COVID-19 risks continuing in the US and Europe.
While this would be the worst performance since 1998, it would still make Korea one of the best-performing economies in the world this year.
In the aftermath of the coronavirus public health crisis, the South Korean government unleashed $275 billion in fiscal stimulus measures to support the economy and limit the downturn. The central bank also slashed interest rates to an all-time low of 0.5%.
Later this week, consumer and business confidence, construction output, retail sales, and manufacturing and industrial production data will be released.
Overall, foreign investors appear to be bullish on the South Korean economy. Foreigners were net buyers of $92.62 million worth of shares on the leading benchmark index, Kospi. The bond market saw higher yields as the benchmark 10-year yield climbed 1.6 basis points to 1.499%. The highly liquid three-year Korean Treasury bond yield edged up 0.9 basis point to 0.917%.
On Monday, Seoul reported 88 confirmed cases of the coronavirus, down from 119 on Sunday. South Korea has had more than 26,000 infections, with a death toll of only 460.
The USD/KRW currency pair dropped 0.35% to 1,128.50, from an opening of 1,132.51, at 17:11 GMT on Tuesday. The EUR/KRW tumbled 0.18% to 1,334.96, from an opening of 1,337.43.
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